Discos management contracts in sell-off process: PC to propose to CCoP to include provincial stakes

ISLAMABAD: The Privatisation Commission (PC) is to propose to the Cabinet Committee on Privatisation (CCoP) to include provincial stakes in the management contracts of power Distribution companies (Discos) as envisaged in the sell-off process.

According to Special Assistant to Prime Minister on Power and Petroleum, Tabish Gauhar, the issues of Hyderabad Electric Supply Company (Hesco) and Sukkur Electric Supply Company (Sepco) are being considered with reference to developing a provincial stake in their privatisation process.

In this regard, he said, three different scenarios were presented for consideration of the CCoE which are as follows: (i) business as usual; (ii) private management contracts; and (iii) provincializing the Discos under the Public Private Partnership (PPP) model.

During the ensuing discussion, Minister for Maritime Affairs, Ali Zaidi did not support scenario-III i.e. provincializing Discos under the PPP mode arguing that it was not workable as the provincial government will not be interested in taking on liabilities. Moreover, it was the task of the federal government to implement the writ of the state. He further argued that if the provincial governments do not cooperate with the private management, then problem will not be resolved. Adviser to the PM on Commerce and Investment, Abdul Razak concurred with the remarks that the Government of Sindh would not pick up the liabilities of the two Discos and would come back to the federal government for financial support to meet the liabilities.

Minister for Power maintained that since the CCoP had already taken a decision in principle about privatisation of the Discos, this matter may be referred to the Privatisation Division for examining the possibility of developing a provincial stake in the management contracts as envisaged in the privatisation process. The chair supported the idea that the provinces should also be stakeholders in the Privatisation of Discos.

The Cabinet Committee on Energy (CCoE) noted the presentation with the direction to the Power Division to submit a summary for the CCoP proposing inclusion of provincial stakes in the management contracts for Discos as envisaged in the privatisation process.

According to the plan, five Punjab-based financially sound Discos, ie, Islamabad Electric Supply Company (Iesco), Gujranwala Electric Power Company (Gepco), Lahore Electric Supply Company (Lesco), Faisalabad Electric Supply Company (Fesco) and Multan Electric Power Company (Mepco) will be given to the private sector under a ten year Concession Agreement (CAs) under which the party/parties that acquire the company for ten years will have to invest from its/their own resources to improve the distribution and transmission infrastructure.

"The new investor will invest in transformers and ABC bundle cable and other related equipments aimed at improving the performance of the company and reduce losses. The investor will get a return on its investment," the sources continued.

The five loss making and financially weak Discos like Hyderabad Electric Supply Company (Hesco), Sukkur Electric Power Company (Sepco), Quetta Electric Supply Company (Qesco), Peshawar Electric Supply Company (Pesco) and Tribal Electric Supply Company (Tesco) will be given to investors on the basis of a five year management contract under which the government will invest to improve their infrastructure, reduce losses, and improve recovery. The management/investor will get the share in savings to be achieved through reduction in losses and improvement in recovery.

Copyright Business Recorder, 2021