EDITORIAL: The Asian Development Bank’s (ADB’s) revelation that “significant investment is required in critical infrastructure across all Discos (power distribution companies)” is not surprising at all, since this sector’s corruption, theft and losses that feed the circular debt have been a thorn in the side of the government for years.
Yet it’s not immediately clear if “upgrading, modernising, and expanding secondary transmission lines and substations”, along with replacement of transformers, will get the job done.
The bigger problem is that there is still no final decision, much less a clear plan of action, about the fate of these companies. Talk of privatisation goes back decades, with still no tangible result. That’s one reason the market tends to simply laugh off such ideas whenever the energy ministry gets a new face and makes the same old tall claims.
Reports of provincialising Discos – effectively dumping them onto the provinces without first privatising management – also raised more questions and concern than answers. Going by a Business Recorder exclusive report, however, it increasingly appears that the government is having second thoughts about this plan as the Power Division has been directed to scrap the decision to provincialize distribution companies on that basis.
Lack of capacity has been cited again and again for resistance to transfer responsibilities to the provinces and it should be a matter of serious concern to the decision makers that the eighteenth constitutional amendment, approved by parliament in 2010 with a consensus, remains unimplemented as far as devolution of social subjects is concerned which, in turn, accounts for an extremely narrow fiscal space and unsustainable budget deficit.
Little does the federal government realise the fact that the provinces have the capacity to hire sector experts and at the same must be held responsible by the general public for poor sectoral performance – a responsibility that if not discharged appropriately would have serious political implications.
Be that as it may, Nepra’s (National Electric Power Regulatory Authority’s) Performance Evaluation Report for Fiscal year 2021-22, released earlier in the year, once again identified persistent mismanagement and poor governance as the driving force behind Discos’ combined losses of Rs170 billion.
Now, with the circular debt rising unnecessarily and squeezing more out of the exchequer when it is already deep in red, ADB is naturally considering prioritising projects because of the “limited loan amount initially earmarked for the project (dollar 200 million)”.
It’s probably best not to waste too much time on the “rapid needs assessment of Discos, with an aim to reduce technical and commercial losses and to improve collection” since there are already plenty of such surveys and assessments with the ministry and Discos.
There’s no doubt that ADB’s unending meetings with different ministries, provincial governments and senior management of distribution companies will only give it data that is already readily available. So the sooner the execution of these projects takes place, and the sooner results can begin to show, the better we’ll be able to know if they’ll help Discos turn around.
Yet it’s equally, if not more, important for the political end of the reforms to begin immediately as well. The privatisation process should be taken out of cold storage and corporatised and duly privatised Discos should be handed over to the provinces in accordance with the spirit of the 7th NFC award and 18th constitutional amendment.
Both steps are riddled with complexities and even the fastest possible track will take a while to materialise, so time is truly of essence.
Otherwise, help from ADB and the World Bank will plug a few holes here and there, of course, but the long term trend will not change. Let’s not forget that all the paralysis in government, which compounds Discos’ losses, bloats the circular debt and takes a big toll on the end consumer. Discos have been a problem from the start.
It’s bad enough that a proper transmission and distribution network, relative to generation capacity, was never erected because it didn’t bring the kind of kickbacks for decision makers that Gencos did. But it’s much worse that no subsequent administration gave it the attention it deserved.
Copyright Business Recorder, 2023
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