President issues ordinance to restructure power distribution companies

President Asif Ali Zardari promulgated an ordinance to eliminate a legal barrier preventing the government from dismissing the boards of all loss-making power distribution companies (DISCOs).

The State-Owned Enterprises Governance and Operations Amendment Ordinance 2024, effective from June 5, 2024, was issued a day before the National Assembly and Senate sessions. 

This move reflects the government’s preference for using ad hoc measures rather than introducing a bill in parliament to amend the law.

The ordinance, which can remain in effect for up to eight months with a four-month extension from the National Assembly, grants the government temporary legal powers to remove independent directors appointed to the boards of state-owned enterprises (SOEs).

The government has amended three sections of the SOE Act 2023, which had previously hindered the implementation of Prime Minister Shehbaz Sharif’s decision to dismiss the boards of eight DISCOs.

On May 2, the board nomination committee, led by Power Minister Sardar Awais Leghari, recommended the removal of directors of all 10 DISCOs. However, the PM approved the dismissal of directors from eight companies, excluding Hyderabad and Sukkur DISCOs.

However, the plan to eliminate political influence from the boards of eight DISCOs faced significant pushback. The SOE Act, effective from January 2023, initially protected the three-year tenures of the boards appointed during the Pakistan Democratic Movement (PDM) government.

Additionally, the government amended Section 4 of the SOE law, reducing the SOE policy’s scope by excluding performance evaluation of ex-officio and independent directors.