Discos likely to be put under army’s microscope

ISLAMABAD: The Federal Cabinet is all set to approve establishment of Performance Management Units (PMUs) in five high loss-making power Distribution Companies (Discos) under a serving Brigadier of Pak Army as dismal performance of Discos has made the sector unsustainable, sources close to caretaker Minister for Power and Petroleum told Business Recorder.

The Federal Cabinet which is scheduled to meet on Tuesday (today) will consider the proposal, prepared in the light of a decision of Apex Committee (AC) of Special Investment Facilitation Council (SIFC).

Sharing the details, sources said, after unbundling of WAPDA, power distribution business in Pakistan was entrusted to ten Distribution Companies (excluding Karachi which is being served by a private company).

The appointment of suitable persons as the Chief Executive Officers (CEOs) in these Discos, under Ministry of Energy (Power Division) has always been a challenge for the government.

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Various modes had been experimented in the past, but all such efforts to fill the positions of CEOs, with required skill-set and expertise to turn around these companies, have failed. As a result, power sector has been beset with inefficiencies primarily due to lack of effective leadership. This has resulted in jumping of circular debt up to the tune of Rs. 2.310 trillion, as of June-2023. The receivables of Discos have also piled up to the tune of Rs. 1.786 trillion, thus making the sector un-sustainable.

According to Power Division, during Financial Year-2023-24, it is apprehended that Discos may make a loss of around Rs. 589 billion which includes under recovery and loss above NEPRA’s threshold.

These companies were created for corporatisation and to further privatisation in the distribution system. However, due to rampant mismanagement, whole improvement in the process for further reforms has been derailed. Resultantly, these entities have now become a constant source of bleeding for the national exchequer.

Power Division argues that in order to minimise losses in power sector, Government has launched a campaign against electricity theft and recovery from defaulters. However, it is apprehended that weak leadership of Discos may not be able to fetch desired results. Specifically, Discos, i.e., HESCO, SEPCO, PESCO and QESCO facing serious capacity limitation of management and requiring administrative assistance, are likely to bear a huge toll on administrative and financial position of these Discos.

The Apex Committee meeting of SIFC held on October 4, 2023 decided to establish an Anti-Theft Taskforce, comprising officers from law enforcement, district administration and intelligence agencies, and their subsequent attachment with Discos incurring significant losses, i.e., QESCO, PESCO, SEPCO, MEPCO and HESCO.

The pilot project will commence with HESCO and be replicated in other Discos after evaluating the results of the pilot intervention in HESCO.

After explaining reasons, Power Division has submitted following proposals for Cabinet approval: (i) a Performance Management Unit be established in each Disco. As a pilot first PMU shall be established in HESCO consisting of officers from PAS, FIA and Intelligence Agency headed by a BS 20 officer of Pakistan Army.

This PMU shall report directly to Secretary Power Division; (ii) Ministry of Defence may post one serving BS-20 officer from Pakistan Army, along with team and allied staff, for strengthening the management of each Disco. Initially, only one such team would be required for HESCO; (iii) Ministry of Defence may post one officer from Intelligence Agencies in each Disco; (iv) a serving Police Officer of BS-18 may be posted in each Disco by respective Provincial Police authorities for coordination with police authorities in the Anti- theft campaign; and (v) NADRA/ IMPASS and the banks may be directed not to issue or renew passports or open bank account of those defaulting individuals, whose lists shall be shared by Power Division with these authorities based on the input provided by PMU.

Power Division has further stated that grade- 17 officers from Pakistan Administrative Service (PAS) were posted in all Discos. However, these officers have been posted out. FIA officers of grade 17/ 18 were attached to three Discos (HESCO, SEPCO and PESCO) in the first instance, to facilitate institution of immediate action against colluding employees of Discos in theft and under recovery campaign.

The Finance Division has reportedly opposed a proposal of the Power Division regarding establishment of Performance Management Units (PMUs) in loss-making power Distribution Companies (Discos) under senior army officers (brigadiers), arguing it will further deteriorate governance within Discos, sources close to Secretary Finance told Business Recorder.

Finance Division, in its comments on Ministry of Energy’s (Power Division) Office Memorandum of November 10, 2023 stated that the proposal contained in the draft summary for the Federal Cabinet regarding establishing of PMUs headed by a BS-20 officer of Pakistan Army and manned by officers from Pakistan Administrative Service (PAS), Federal Investigation Agency (FIA) and intelligence agencies has not been endorsed, the sources added.

Finance Division, in its comments argued that theft control and performance management are two entirely different functions, adding that Terms of Reference (ToRs) and Key Performance Indicators (KPIs) of the proposed PMU have not been indicated.

Finance Division further asked Power Division to provide ToRs for comment on the remit; and further maintained that in its proposed form, the PMU will render the formal management of the company irrelevant and further deteriorate governance within Discos, and suggested that the scope of the new Unit should be strictly limited to anti-theft measures and recovery of bills.

The proposal will entail additional costs for the companies who are already making losses, the sources quoted Finance Division as saying in its comments, sent with approval of the Finance Secretary, who is an officer of PAS, erstwhile District Management Group.

Copyright Business Recorder, 2024