The shares will be sold at face value and no premium will be charged. The reasoning is simple. The people own DISCOs, while the Government is only a representative of the people, or an attorney, so to speak, not the real owner. Therefore, the government, being only a manager of DISCOs, cannot ask the people - the real owners - to pay any premium on shares.
Direct sale and purchase The sale and purchase of shares will be directly between a DISCO and its customers. If a customer wants to sell his shares, he will surrender his allotment letter against a receipt at the nearest DISCO revenue office or service center. The revenue office of the area, which issues monthly bills to the customers, will immediately give credit to the subscriber's account for the value of the surrendered shares, while sending the allotment letter to the DISCO head office for cancellation of shares.
The credit amount will then be adjusted in the monthly bill of the customer. This arrangement will have a great benefit. The customer will get his payment for the shares while the DISCO will not have to strain its cash reserves.
Payment of dividends The payment of dividends will also be through credit in the monthly bill of the customer-shareholder. As soon as dividend is declared, whether interim or final, the amount will be credited directly to the bills of all customers-shareholders. The great advantage of this arrangement will be that the DISCO will not have to spend a huge amount on the preparation, issue and safe delivery of dividend vouchers to the customers. It will also save a similar amount on the payment of dividends through banks. The DISCO will have to neither deduct this extra expenditure from the total dividend amount nor add to the company's normal expenses. In either case, the customers will be the beneficiaries.
Management The chief executive of a DISCO will be elected directly by the majority of total shareholders. Before election, every candidate will be required to submit to the shareholders his plan for improvement in operations and services. Every shareholder will have a single vote, irrespective of the number of shares held by him, to avoid dominance of the rich shareholders.
At the end of every quarter, the chief executive will submit his progress report, comparing achievements with his target, in a letter that will be attached with the next month's bill of every customer. At the end of every 12 months, the chief executive will seek a vote of confidence from at least two-thirds of the shareholders. He may continue in office as long as he gets a vote of confidence. It will always keep him on his toes.
There will be no need for a Board of Directors as they turn out to be mostly parasites. (The boards of directors did little to stop the rot in PIA, Pakistan Steel and other public sector organisations.) However, the powers of the chief executive will be defined precisely. In all major matters, he will seek approval of customers through a referendum.
Benefits of being a customer/shareholder A DISCO's customers will benefit in several ways as its shareholders:
a) They will get the entire profit that accrues to their DISCO. After all, the profit will come from what they themselves pay to the DISCO through their monthly bills.
b) They will get the benefit in both ways: (i) higher dividends in case of profit due to efficiency in operations and reduction in expenditure and (ii) better services due to investment in infrastructure.
c) The ordinary operations and services will improve tremendously as the Chief Executive will keep the employees on their toes in removing complaints and problems. (Poor service will not get him vote of confidence next year.)
Main benefits The implementation of this proposal will have the following main benefits:
a) The process of privatisation can be started immediately. There will be no need to spend time in making any preparations.
b) The privatisation will be done on "as is" basis, without any need for any detailed studies or restructure.
c) In a unique situation, the shareholders will also be the customers of the DISCOs and will be the direct beneficiaries of both lower costs and higher profits.
d) Every DISCO will have the widest possible ownership base. No individual or group will become the majority shareholder. (In case of KESC, we know what may happen if it occurs.) As a result, there will be no pressures to increase profits at the cost of the customers.
e) The capital base of the DISCO will continue to expand, allowing it to have interest-free funds to invest in the expansion of its infrastructure. In other words, the expansion and its financing will occur simultaneously.
f) The middle class investors will get an opportunity for a very safe and profitable investment.
g) Despite the huge volume of the DISCO shares, there will be no volatile effect on the stock exchanges because the shares will be sold and purchased directly by the DISCOs.
h) With the entire management being Pakistani, the security and protection of national interests will be ensured.
Reducing cost of electricity The DISCOs, as buyers, will decide how much to pay for electricity, not the producers determining its price. In other words, DISCOs will decide what price to pay for electricity and to get supplies from which producers.
On the purchase side will be DISCOs: (Hyderabad, Quetta, Multan, Lahore, Gujranwala, Faisalabad, Islamabad, and Peshawar.) Add to them Karachi Electricity Supply Company, which may be asked to sell all its shares to its customers.
On the supply side will be: hydel power producer (Wapda), thermal power producers, independent power producers, rental power plants, nuclear power plants, others. New power producers will emerge, with their own financial resources. The government will no longer have to allocate its limited resources for power generation, including large dams.
Pepco will be disbanded because central control of purchase and distribution of electricity will no longer be required. (It is already on its way to abolition.) As a result, its agreements with power producers will be cancelled. (It will not be legally possible to impose present agreements on privatised DISCOs, which will now be public limited companies, owned by its customers.) Nepra will also be abolished because it will no longer be able to impose its prices on DISCOs.
Consequently, power producers, both public and private, will have to negotiate directly with DISCOs and offer lowest possible prices. DISCOs will not sign long-term agreements because they will always switch to new producers that offer lower prices. Thus, the present producers will have to decrease their costs all the time so that they remain competitive. As lower prices become available, the expensive power producers will go out of business. National Transmission Dispatch Company will continue to get power from producers and transmit to DISCOs, in accordance with the agreements between the sellers and buyers.
Not subject to NEPRA decisions, new power producers will offer lowest prices to DISCOs. hydel, wind, solar, coal and other alternative energy sources will flourish. The power plants running on very expensive furnace oil and scarce natural gas will seek cheaper energy or will have to be shut down. Chief executives of DISCOs, being answerable to customers-shareholders, will dare not accept higher prices from any supplier at the cost of lower prices available from others.
The suppliers will offer electricity to buyers at their lowest prices. The buyers will select suppliers and place orders with them, depending on price, convenience and other factors. A DISCO may persuade power producers to set up generation plants in its areas on mutually agreed terms.
Line losses A major cause of financial difficulties of DISCOs is line losses. The chief executive, under our plan, will formulate targets for reducing line losses to the absolute minimum. He will ensure that his field staff meets the quarterly targets, as he will face a vote of confidence after 12 months.
Power theft through various means will become impossible. If it occurs, the field staff will face the wrath of the bosses as well as the customers. Default in payments of bills, even by the powerful and government departments will also not be tolerated. A DISCO will not have any reason not to recover payments, as it will not be under political pressure. It will be answerable to its customers, not any government authority.
Conclusion The privatisation in the past has been more beneficial to investors than the people, who are the real owners. The proposed method will give all benefits to the people, who will be consumers as well as shareholders. The same method may be adopted for Pakistan Telecom Company (PTC), whose customers can be made also shareholders for the shares still owned by the government. The method of privatisation will be a new model for other industries as well as for other countries.
(Concluded)
(The writer is a consultant for paper and electronic media and a writer on current affairs)
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