Transitioning to privatization of Discos–II

WAPDA thus became a mega vertically integrated electricity utility of Pakistan besides being responsible for developing water and power infrastructure.

Distribution of electricity was structured as 8 regions of WAPDA, which in 1981 converted into Area Electricity Boards (AEBs) on the similar UK model.

As the job was onerous to say the least and on account of some serious constrictions, WAPDA by mid 1980s was faltering which led to Pakistan’s acceptance of World Bank advice to de-bundle the mega-utility’s power Wing into 8 DISCOs, the National Transmission & Dispatch Company (NTDC) and four GENCOs.

Transitioning to privatization of Discos-I

Consequently, the AEBs were incorporated into the present DISCOs as distinct and independent companies duly registered with the SECP.

So as to manage the newly set-up DISCOs, PEPCO started operating as the managing agent. PEPCO was destined to fade-away in a period of 3 years or so during which full corporatization of the DISCOs was envisaged. Once independent, the DISCOs were to be privatized.

Unfortunately, true corporatization could not be achieved due to the continuing energy crises, intervention by the GoP by politicizing the DISCO BoDs and then taking-over the day-to-day management in place of PEPCO. This non-professional micro-management has led to an extremely weakened DISCO, a disgruntled human resource, below-par service for the electricity consumers and balance sheets that do not attract any takers.

Most recently, GoP has decided through the SOEs Act, 2023 to make the DISCOs truly independent through nomination of professional BoDs and a clear-cut mandate to steer the DISCOs towards privatization. In other words, it is like going full circle and once more letting the private sector be responsible for distribution of electricity in Pakistan.

However, there would be a difference as the Regulator, NEPRA, would be there to ensure that the DISCOs do not remain as raw business alone. In addition, there are some more attributes that would allow the DISCOs to be privatized. These would be the facts relating to continued unfilled position to the tune of 50,000 or so in all the DISCOs, the recent contract recruitment of top professionals and the new practice of out-sourcing various activities in the companies including security, maintenance of infrastructure, IT services, etc.

In a way, these facets of operations are privatized now. Incidentally, all of such services are already outsourced in the KE.

Coming over to the actual transition of the DISCOs to privatization, we see that it could be any of the variants. It could be a long-term management contract, a concession for 15-20 years where the concession holder could be required to also invest for infrastructure development (with returns as a percentage of invested amount, etc.) or outright sale lock stock and barrel. All of these methods/eventualities have their pluses and negatives and different time periods to precipitate.

However, the most non-controversial would be doling out long-term concessions, while the ownership remains with the state.

The CTBCM, according to experts, is a near dead squib and may relegate itself with privatization. This is so because it envisages wires only business for the present-day DISCOs, which does not have any buyers in the private sector.

KE too is only progressing because of its being an integrated utility. Of course, the single buyer model too is moving towards extinction and soon it is to be replaced with a multi-buyer system.

The privatized DISCOs would attract cheaper generation which will then have their own sale purchase agreements – assuring competitive tariffs for its customer. However, wheeling of power and B-B contracts are acceptable to the investors – but again to an extent.

In other words, the DISCOs would open up their systems to businesses comprising of bulk power consumers, while not restricting to the wire business alone. A healthy competition would ensure making space for DG (distribution generation), while retaining the DISCOs in their present shapes (of course large entities may be divided into more than one companies – to make them manageable) with the national grid (NG) serving the Country as a necessity and a pre-requisite to a healthy power sector. IEA’s latest report of 2025 debunks the expectancy that the grid is dying or gone. It in fact sees the grid prospering from 2025-26 onwards.

Actually, the present surplus generation regime is going to be a short-lived phenomenon and would change the moment Pakistan attains a growth rate of plus 5% against the present expectation of 2% or so as has happened in the world too – examples being Australia, Germany, and Scandinavian States.

The most recent tweaking of the net metering rates will of course correct the lopsided facilitation of the high end domestic and industrial consumers. Even the induction of the commercial scale BESS would not upset the apple-cart and the grid will live with an openness that allows for a multi buyer regime in the country.

As against the earlier decades, the State is much more-wiser – specially, after KESC’s privatization and the myriad issues that arose subsequent to the change. However, it still needs to be decided whether the requirement is for outright privatization or for awarding long-term management concessions. So-called provincialization is a non-starter and need not be considered – specially, when it will lead to delay alone instead of any succour for the government or the electricity consumers. But the best thing that has come out of the present morass is the acceptance of the proposed change.

(Concluded)

Copyright Business Recorder, 2025