Pakistan Electric Power Company (Pepco) is unlikely to be dissolved by June 30, 2011 despite tall claims of the government as the Planning Commission failed to fulfil its commitment, well informed sources in Ministry of Water and Power told Business Recorder.
Ministry of Water and Power, under the guidance of Deputy Chairman, Planning Commission, Dr Nadeem-ul-Haq was engaged in finalizing power sector reforms package to empower Discos and NTDC and outline measures to ensure efficiency in fuel use, transparent financial management and improved governance. The prime focus of the reform package was settlement of dues on account of unpaid tariff differential of the previous year.
The incumbent Managing Director, Pepco, who replaced Tahir Bashart Cheema, is jubilant at this delay, expected for months, as his reputation in the Ministry is in question. On Tuesday, Planning Commission's top brass discussed their failures in detail during a meeting and later on another meeting was chaired by the Minister for Water and Power, Syed Naveed Qamar, to evolve a new strategy.
The government had committed to the international financial institutions ie International Monetary Fund(IMF), World Bank and Asian Development Bank, that Pepco would be dissolved and full autonomy would be given to the Discos and Central Power Purchase Agency (CPPA) but the Planning Commission which took the responsibility of power sector reforms failed to take any measures in this regard.
USAID had also provided top American power sector consultants to recommend reforms in the deteriorating power sector on the request of Planning Commission. The Power Distribution Improvement Programme (PDIP) is a USAID-funded project designed to facilitate improvements in electric power distribution utilities in Pakistan initiated in September, 2010 for three years.
PDIP was designed to be implemented in two components. First component was to begin with implementation of operational audits of each of the eight government-owned distribution utilities (Discos), and definition of performance improvement action plans for each. Component two would focus on execution of the performance improvement action plans for each Disco, including implementation of performance improvement projects to demonstrate a number of key operational issues.
"International financial institutions will be angry over delay in dissolution of Pepco and this aspect has been discussed at the meetings on Tuesday," said one of the officials on condition of anonymity.
When contacted, a top official of the Ministry of Finance confirmed that dissolution of Pepco will be delayed but he was unclear as to how much time it will take to complete the process. Planning Commission at its website has mis-stated that this year loadshedding was 30 per cent less than the previous year. Presently power shortfall has crossed 6000 MW which is much higher than the previous year.
Planning Commission has also made the following claims ; (i) customer classification survey completed in some Discos which has added nearly 10 percent to revenue in these Discos;(ii) distribution losses have been reduced from 20.6 percent to 19 percent at present. Loss reduction schemes have been fast tracked; (iii) hydel generation projects (Tarbela IV, Gomal Zam, Kurram Tangi) being fast tracked both in the Public and Private Sectors to reduce cost of power;(iv) low BTU fields like Uch being exploited for cheap power generation. Uch II has already reached financial closure; (v) small dams being expedited through USAID and other resources for fast track development of new agricultural acreage and power generation and (vi) Chashma II has started producing 340 MW power and the Chinese have indicated that they will install a number of more units.
Minister for Water and Power and Member Energy, Planning Commission, Shahid Sattar was not available for comments. The federal cabinet on Tuesday granted ex-post facto approval of Rs 65 billion interest free loan to Pepco which had been extended on the special instructions of Prime Minister, Syed Yousuf Raza Gilani.
Meanwhile, a press release, issued by the Ministry of Water and Power today said that in a meeting under the chairmanship of the Minister of Water and Power, in the Ministry of Water and Power (MWP), the issue of dissolution of Pepco was discussed. Representatives from the Economic Reform Unit (ERU), Planning Commission and Pepco attended the meeting to review the timeline for transferring the functions of Pepco and adjustment of the staff. The meeting showed satisfaction on the ongoing process of dissolution and agreed to strengthen the process, going forward.
A four-step process, initiated for dissolution of Pepco in September 2010, was discussed in detail. Phase one, relating to reconstitution for Boards of Distribution Companies discos and National Transmission and Distribution Companies (NTDC) has successfully been completed. This has ensured operational independence to power sector companies as envisaged in the power sector reform plan.
Phase two has been started by winding departments within Pepco and reducing Pepco's involvement in National Transmission & Dispatch Company (NTDC) and Central Power Purchasing Agency (CPPA) and transferring of powers to other entities. In the meantime, the strengthening of CPPA and NTDC is being undertaken to strengthen the ongoing reform process.
By late summer, the remaining departments will be disbanded, concluding phase 3. Finally, Phase 4, relating to declaration of solvency, will complete the dissolution process. The meeting reiterated its commitment to the dissolution of Pepco in the four phases under the reform plan developed by the Government of Pakistan.