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Power struggle

Will the privatisation of power distribution and generation companies solve the energy crisis?

Power struggle
Protest against privatisation.

While the federal government intends to gradually privatise all the power distribution companies (Discos) and generation companies (Gencos), their employees say they would resist the move.

The Council of Common Interests (CCI), headed by Prime Minister Nawaz Sharif, decided in principle earlier this month to privatise all the state-owned Discos, Gencos and other Power Sector Entities (PSEs) in line with the 2011 Policy.

“In the past, unnecessary recruitments and corruption have resulted in mismanagement in these organisations, and privatisation, therefore, is the only solution in the national interest,” said the prime minister.

The Privatisation Commission, according to the officials who do not want to be identified, has approved restructuring and privatisation of Faisalabad Electric Power Company (Fesco), Lahore Electric Supply Company (Lesco), Hyderabad Electric Supply Company (Hesco), Peshawar Electric Supply Company (Pesco), and others. Privatisation of some thermal power generation stations has also been approved.

Earlier, the Cabinet Committee on Privatisation, besides others, had decided that Islamabad Electricity Supply Company (Iesco) and Gujranwala Electricity Supply Company (Gesco) would be offered for strategic partnerships. It directed the Privatisation Commission to ensure that the interests of employees are protected at all costs.

Minister for Water and Power, Khwaja Muhammad Asif, told the National Assembly recently that in order to improve efficiency of the PSEs, some Discos and Gencos are being considered for privatisation.

Improvement in the efficiency through competition, accountability, managerial autonomy and profit incentives; and the generation of required resources are the objectives of the government for the privatisation of power sector.

“As a matter of fact, all Discos, including Pesco, are eventually to be privatised. Pesco’s turn may come later, but it will,” said a knowledgeable source on the condition of anonymity.

Pesco recently planned to privatise three feeders — in Bannu and Dera Ismael Khan — but the proposal met stiff resistance from Wapda employees.

Employees fear privatisation would entail job insecurity and costlier energy for the masses and will be tantamount to economic killing of so many families.

Gohar Taj, chairman of All Pakistan Wapda Hydro Electric Central Workers Union (HECWU), which is the elected collective bodies’ agent (CBA) of Wapda, said “the government had decided to privatise Pesco, Lesco and Fesco on the pressure of IMF. It has obtained approval from the CCI through majority.”

He warned that Wapda workers won’t accept any privatisation or golden handshake offers. “Due to our strong opposition, Pesco feeders couldn’t be privatised in Bannu. We will hold countrywide demonstrations on March 5 and on March 11 in Islamabad. We will take along sympathetic parties and take the nation into confidence on the hazards of privatisation,” he said.

Taj was of the view that the government should revive the loss-making entities with the staff and officers of Discos. CBA will support it. It can take help from the law enforcement agencies to curb stealing, recover dues from defaulters, and check corruption within the companies. Pesco employees, I am told, have increased recovery ratio by 10 per cent and line losses have been curtailed by one per cent in the last three months.”

According to him, “Funds given to improve age-old infrastructure are utilised for extending low-tension lines to benefit politicians, which further increases pressure on the national grid.”

Tila Muhammad, provincial chairman of the steering committee of Wapda, Pegham Union KP, said, “We won’t accept offers like the ones made to PTCL employees who opted for retaining jobs but are denied due rights since then. We would oppose the move tooth and nail. Privatisation will do no good to consumers as income-hungry private owners of Discos would sell electricity at exorbitant prices,” he says, adding, “Privatisation with regard to feeders failed earlier. IPPs and RPPs scandals are fresh in minds. National institutions need to be improved and not privatised. If there are corrupt officials, the government has all the resources to try and punish them.”

Donor agencies like the World Bank and Asian Development Bank have identified poor governance, political and bureaucratic interference, institutional weakness, and lack of professional management as key shortcomings of Pakistan’s PSEs urging their restructuring and privatisation.

For many years, the power sector has been virtually in private hands. For example Pepco, headed by an independent MD, manages all the affairs of corporatised nine Discos, four Gencos and a National Transmission Dispatch Company. These companies work under independent board of directors (chairman and some directors are from private sector). These are administratively autonomous and all entities have the physical possessions of all their operational assets. But the sector’s woes have risen in the meantime.

Similarly, feeders in Pesco and other Discos have been privatised in the past but contractors soon backed out from the contract. People ask if privatisation of KESC has brought any dividends. Have the consumers of Karachi benefitted? Has the government got relieved of its subsidies? The government has allocated Rs55 billion out of its total power sector subsidy of Rs220 billion this financial year to pick KESC tariff differential this year even though it has long been privatised.

Without structural reforms, stringent laws to punish and deter power stealers, community participation, ending of political intervention, checking mismanagement and a sound policy of reward and punishment for both consumers and workers of Discos, even privatisation will be meaningless.

“The government should provide security to raiding teams. Public mindset should be changed by educating them against power theft through media, ulema and teachers. Community intervention can be ensured by assigning areas of responsibility to local bodies’ members at ward or transformer level. Field/line staff deficiency must be removed. Workers should be given commission on extra collection beyond benchmark target at different rates,” said the source.

Accountability, power generation, especially from hydel and gas, and renewal of power infrastructure are also vital for bringing demand and supply gap and line-losses down.

Pesco, according to an estimate, is worth over Rs300 billion with all its assets and liabilities. “Pesco is incurring a loss of Rs one billion a month. Out of the total Rs6.2 billion worth units billed, around Rs5 billion are recovered. Its total transmission and distribution losses are over Rs75 billion at present. But all this is not entirely caused by incompetence and corruption of employees. They have security problems and are attacked by powerful stealing mafia. The police are over-stretched for the precarious security situation to escort them. Laws against power theft are toothless. A power thief is set free by fining him Rs500-1000. Now this emboldens others to follow suit,” the source said.

The Khyber Pakhtunkhwa Assembly has passed resolutions against privatisation of Pesco in 2003, 2005, 2006 and several other occasions. The assembly was informed that the province had already paid the total transmission and distribution cost of Pesco system, therefore the province has every right to claim the ownership of Pesco, including its assets, under Article 157(2) of the Constitution.

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