ISLAMABAD: In a significant development aimed at addressing the longstanding operational challenges faced by Pakistan’s power distribution companies (DISCOs), the CCoP has approved the adoption of a long-term concession model for private sector participation in the management of two DISCOs, namely GEPCO and HESCO.
According to sources, this decision, made during a recent meeting of the Cabinet Committee on Privatisation (CCoP) held on 7th February 2024, signals a strategic shift towards improving governance, modernizing operations, and attracting much-needed investments in the power sector.
The move comes after extensive deliberations by the Power Division, which identified poor governance and inadequate investment as key challenges plaguing the DISCOs. Recognizing the limitations of previous attempts to transfer DISCOs to provincial governments, the government opted for a privatization strategy, viewing it as the most viable solution to drive efficiency and performance improvements.
The decision to adopt the long-term concession model was backed by successful precedents in countries like Turkey, Argentina, Brazil, and Uganda, where private sector participation in power distribution led to significant improvements in service quality, loss reduction, and increased investment. Under this model, the government will engage with concessionaires to gradually reduce government liabilities while ensuring minimal impact on consumer tariffs.
Moreover, the CCoP decided to annul the previous cabinet’s decision to transfer DISCOs to provincial authorities, reaffirming the commitment to keep all DISCOs on the privatization list. Additionally, the proposal to appoint the International Finance Corporation (IFC) as the transaction advisor was not approved by the CCoP. Instead, the commission directed the hiring of a financial advisor in accordance with established procedures.
Furthermore, the CCoP directed the Privatisation Commission to lead the process of offering DISCOs through long-term concession, with support from the Power Division. It also approved the constitution of a Technical Working Group to expedite the process and ensure technical requirements are met.
CCoP also directed power division to submit the case to federal cabinet for bifurcation of two DISCOs namely LESCO and MEPCO, with no increase in the existing human resource of the proposed DISCOs after bifurcation. This measure aims to enhance the management efficiency of these DISCOs and streamline operations.
The power division through a summary for CCoP titled as “Private sector participation in operation of DISCOs through long term concessions leading to their eventual privatization” proposed to CCoP to consider and grant approval to following proposals:
- Delisting of all DISCOs from provincialization and privatization list,
- Offer DISCOs through concession model;
- Constitution of Ministerial Steering Committee under the chairmanship of Minister for Energy along with Minister for Privatisation, Minister for Law and Minister for Planning.
- Constitutional of Technical Working Group under power division to support the ministerial committee with composition to be determined by minister for energy as per requirement.
- Appoint IFC as Transaction Advisor; and
- Action Plan with responsibility matrix and timelines.
It is pertinent to mention that the approval of the long-term concession model marks a significant milestone in the government’s efforts to reform the power sector, attract private investment, and improve service delivery.
The news of CCoP approving private sector participation in DISCOs’ operation is significant and has the potential to bring both positive and negative changes. Here’s a breakdown of the key points:
Positive aspects:
Potential for improved efficiency: Private companies often have better track records in managing operations efficiently, aiming to reduce costs and improve service delivery.
Investment and modernization: Private companies might invest in upgrading infrastructure and technology, leading to more reliable power supply and reduced transmission losses.
Improved financial management: Private entities might operate on a more commercially viable basis, potentially reducing financial losses for DISCOs.
Negative aspects:
Potential for higher tariffs: Private companies might prioritize profit over affordability, leading to increased electricity costs for consumers.
Job losses: The transition to a private model could lead to job losses for DISCO employees, raising concerns about labor protection and social impact.
Lack of transparency and accountability: Private companies might be less transparent in their operations compared to state-owned entities, raising concerns about accountability and potential misuse of funds.
Uncertainties:
The specific model of private sector participation: The details of the model (concessions, partnerships, etc.) will significantly impact the potential outcomes.
Regulatory framework and oversight: A robust regulatory framework and effective oversight are crucial to ensure consumer protection and prevent exploitation by private entities.
Impact on different stakeholders: The specific impacts on various stakeholders (consumers, employees, government) need careful consideration and mitigation strategies.
Overall, this news is complex and requires careful analysis. While there are potential benefits in terms of efficiency and modernization, concerns about affordability, job losses, and transparency need to be addressed effectively through a well-designed implementation plan.
Here are some additional points to consider:
What are the specific terms of the agreement with the private sector?
What measures are in place to protect consumers from potential price hikes?
How will the transition impact DISCO employees?
What oversight mechanisms are in place to ensure transparency and accountability?
By critically evaluating these aspects and ensuring open communication with stakeholders, the potential benefits of private sector participation can be maximized while minimizing the risks.
Please do the following if you really want to save Energy Sector of Pakistan.
1. stop weekly load shedding of 6 to 9 hours which is being carried out at each and every place in Pakistan in the name of tree trimming and maintenance work. This is new practice that is crapt in power system in recent past. This is big blow to efficiency and efforts to increase power consumption and development. This practice is not only effecting DISCOS but every enterprise and business that uses electricity. In addition to weekly regular load shedding additional laod shedding is also carried out due to system limitations. This type of shedding is for longer duration in small cities and villages than big cities. Minimise it and justify it on technical basis.
2.
The component of theft should be minimised in the system. let us put maximum efforts to reduce this component. There is no harm in making this issue a topic of public debate and invite suggestions from retired employees of DISCOS of all ranks.
3.
Change working environment in DICCOS field offices. Staff do not come to office in time.
4.
what is our lesson from K electric privatization? Has it been helpful to improvement or we have started paying to private group in another form.
5.
please stop the story of life line customers and giving them subsidy in rates. Tariff should be rationalized. with the invent if solar panel some customer status change to life line customers. This should be stopped. peak hours and off peak hours rates should be same for all domestic consumers. However, they could be categorized according to their use of power.
6.
special measures should be adopted for those DISCOS where power bill ate not paid.
To enhance efficiency both in Technical and Commercial side, need the effective initiates in management operations, Technology and well qualified personnel. BOD members must be Technical as well as with Financial approach. Retired and tired people and politicised people engagement in board members need to be avoided. They only come for mega corruption. Private participation is good initiative but accountability is important.
The problem with Poor performance of Disco is due to their operational efficiency and weak mamagement and involvement of corrupt culture. Technology and IT Induction is best Tool to enhance the profitability and REDUCTION of losses and improvement in revenue recovery.
Network planning is nerve of company, need to be focused and its quality should be standardised as per international procedures and standards.
Technical losses are also on higher side in Discos due to long feedings.
Commercial losses are also a big chapter due to mega corruption from peon to top management.
Simply two methods are need to be engaged
Operational excellency
Technology shift
Discos will rise in their profitability and efficiency. Remote areas need to be solarised and connected with smart grid technology to reduce the burden of high tariffs.
This decision by the Cabinet Committee on Privatisation (CCoP) to approve the adoption of a long-term concession model for private sector participation in managing two power distribution companies (DISCOs) in Pakistan, namely GEPCO and HESCO, marks a significant step towards addressing the operational challenges faced by these entities.
The move underscores a strategic shift aimed at enhancing governance, modernizing operations, and attracting much-needed investments in Pakistan’s power sector. By opting for privatization, the government acknowledges the persistent issues of poor governance and inadequate investment that have hindered the performance of DISCOs. This decision reflects a commitment to finding sustainable solutions to improve efficiency and performance in the power sector.
The adoption of a long-term concession model signals the government’s intent to involve the private sector in the management of DISCOs, which is expected to bring expertise, investment, and efficiency to these entities. This approach is seen as a more viable alternative to previous attempts to transfer DISCOs to provincial governments.
Overall, this decision reflects a proactive approach towards addressing the challenges in Pakistan’s power sector, with the aim of fostering sustainable growth and development in the country.
The news of CCoP approving private sector participation in DISCOs’ operation is significant and has the potential to bring both positive and negative changes. Here’s a breakdown of the key points:
Positive aspects:
Potential for improved efficiency: Private companies often have better track records in managing operations efficiently, aiming to reduce costs and improve service delivery.
Investment and modernization: Private companies might invest in upgrading infrastructure and technology, leading to more reliable power supply and reduced transmission losses.
Improved financial management: Private entities might operate on a more commercially viable basis, potentially reducing financial losses for DISCOs.
The news of CCoP approving private sector participation in DISCOs’ operation is significant and has the potential to bring both positive and negative changes.
Excellent article. I really like it.