Reviving Pepco

Many changes are going on in the energy sector; recently, the two ministries of power and petroleum have been merged into a unified ministry; now directives have been issued for subdividing Discos; earlier power sector reforms were introduced diluting the role of regulator. It appears that this round of changes is indigenous and home-cooked and has not come out directly from financing agencies or their consultants. This writer will in this space venture to make a case for reviving Pepco.
About two weeks ago, PM Abbasi who is also holding the charge of the Ministry of Energy (MoE), issued directions to divide Pesco and carve out a new Disco for the Hazara division. The directive missed out Mepco with possibly the largest geographical coverage. Now Minister Laghari (of Power Division) has issued a comprehensive order, covering Mepco and other Discos. The implementational aspects, such as of boundaries, are to be decided by respective boards of directors.
In the earlier round of reforms, Wapda's role was considerably reduced to include only hydropower generation and water issues, and Pepco was totally dismembered. Wapda has been further pruned down to deal with hydropower only, as a new Ministry of Water has been created, which may be a step in the right direction, as the subject of water is too important to have a divided attention of one ministry. It deserved a unifying one ministry dealing with all issues of water exclusively, which has been achieved through the creation of water ministry.
The proposal of dividing Discos, and for that matter gas companies also, into smaller companies in terms of organisation and geographical domains, has been on the table for a long time now. Most of the voices, it is said in the two sectors of power and gas, came from the lower tiers of these organisations and it has been argued that smaller setups may give more direct and closer controls to top management.
Carving out a separate Disco for Hazara division has attracted opposition from the relevant circles alleging political undercurrents, as there have been initiatives and demand for a separate province of Hazara earlier and there were controversies over naming of what is now KPK province which used to be NWFP. Technical arguments have been advanced for dividing on load basis rather than geographical basis, although the division logic emanates from geographical contiguity. May be additional geographical entities can be added to Hazara division to do away with the underlying political suspicions.
A common theme of reform proposals for power companies and even other public sector companies has been to make the board of directors independent, powerful and competent enough to undertake supervisory oversight functions or even manage the strategic affairs. This has remained largely a utopia. Pepco was dissolved under this utopia. Neither independent and competent board members could be inducted due to the political and social system prevailing in the country, nor has the bureaucracy been able to provide a conceptual and operational framework of the operations of the board. Senior bureaucrats often are not able to attend the board meetings and study various company proposals, and participate in special committees. Boards' discussions and meetings are dominated by the chairmen and are mostly a perfunctory exercise attempting to meet the legal requirements. Practically, the companies are being managed by bureaucracy from Islamabad. This is true more for power division entities like DISCOs and GENCOs. Whereby individuals may have a lesser inclinations for direct interventions, the CEOs alone function, without a meaningful oversight functions from the board of directors.
Pepco used to function as an intermediary between Islamabad ministry and the Discos. They used to have a CEO and technical department which could understand the technical and operational issues and could provide guidance to entities, examine their reports and have an oversight over them. Rebellious and independence minded CEOs with the benefit of the utopia that we have mentioned earlier managed to sabotage Pepco and got it dissolved in collusion with the interventionist bureaucracy of Islamabad.
Over the years, power sector has been restructured and dismembered. It has gone from one extreme of a monolith Wapda to another extreme of smaller split organisations which are not able to accumulate expertise and develop and absorb technologies and skills. Resultantly, there is hardly any major initiative or proposal which does not emanate from foreign consultants and experts tendered by IFIs (International Financial Institutions). We need an accumulator organisation. This can be done by reviving Pepco which should control Discos and Gencos as well. Although some Gencos (burning furnace oil) will be closed down, many new Discos would emerge. It would become well-nigh impossible to control and manage all these organisations from the ministry in Islamabad. Large companies controlling many organisations have similar central organisations even in the US, Europe and Japan. In India and South Korea, there are integrating organisations of this nature. By reviving Pepco in a slightly altered form as proposed earlier, the current extreme would be balanced.
(The writer is a former member energy, Planning Commission)