EDITORIAL: Whatever possessed the Punjab government to “express willingness” to acquire Discos (distribution companies) based in the province? Surely, the provincial government understands that Discos are the black hole of the power sector; riddled with overheads and losses that are promptly passed onto consumers.
Besides, what’s to gain from simply tossing them over from the federal to the Punjab government? Nobody’s yet elaborated on what they intend to do about T&D losses – which in real terms were the worst in almost a decade in FY22 – staff retirement liabilities, etc., when the province does not even have enough money for a constitutionally-mandated and Supreme Court-ordered election.
There’s also the legal point that currently provinces do not have any control over load management. And meeting growing electricity demand without it is going to be another big challenge. Even without the disfigured balance sheet, this plan can only be based on the assumption that the federal government would gladly guarantee a minimum supply.
That explains why the finance department was “of the considered view that (the) provincial government may give its consent for takeover of provincial Discos located within the jurisdiction of Punjab only to the extent of transfer of assets and not liabilities, along with management control subject to necessary due diligence on part of the energy department”.
These are pretty bold expectations for a deal that lays down no quantifiable expected benefits. Discos have many problems, often elaborated in this space, and any plan that involves them must first require the federal and/or provincial governments to solve them.
Simply changing management is a policy designed to fail, if the intention is to improve operational performance. The example of K-Electric stands out, which continues to struggle because of all the needless problems and financial liabilities it inherited from KESC.
It turned out to be such a bad deal for the new management that it discouraged, not encouraged, the privatisation drive at the end of the day.
But it’s another thing altogether if the exercise is politically motivated; which cannot be ruled out, especially considering the stark absence of a roadmap beyond the takeover. India presents a good example of such issues, where state governments control distribution and often exploit it, by toggling prices, around election time.
Even if there were something to be gained from getting Discos, which is very unlikely, nobody would want them to be milked any further to do things they were never meant to.
All this means that this proposal needs to be studied very carefully before making any decisions. The federal government will no doubt consider all these issues, no matter how much it might want Discos to become somebody else’s headache.
One thing that cannot be argued with, though, is the fact that Discos definitely need reforms. And now that they have hit the headlines once again, perhaps this is the best time to get the ball rolling on first cutting their losses and improving their operations before entertaining fancy ideas like the one that just came from Punjab.
It’s also important not to let such things divert attention from the real, pressing problems of the power sector. Let Discos first learn to do their very basic job of collecting their payments, and stop fuelling the circular debt, and then move on to bigger things.
Unless some detailed explanations come from Punjab, the real intent behind this idea will remain a mystery.
Copyright Business Recorder, 2023
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