Power sector privatisation

Power sector privatisation

By Tahir Ali

March 2, 2014

http://tns.thenews.com.pk/power-struggle-privatisation/

While the Nawaz Sharif-led federal government intends to gradually privatise all of the power distribution companies (Discos) and generation companies (Gencos), their employees are in no mood to let that happen easily.

The Council of Common Interests (CCI), headed by Prime Minister Nawaz Sharif, decided in principle to privatize all the state-owned Discos, Gencos and other Power Sector Entities in line with the 2011 Policy earlier this month.

“In the past, unnecessary recruitments and corruption has resulted in mismanagement in these organizations and privatization, therefore, is the only solution in the national interest,” said the Prime Minister.

The Privatisation Commission, sources said, has approved the restructuring and privatization Faisalabad Electric Power Company (Fesco), Lahore Electric Supply Company (Lesco), Hyderabad Electric Supply Company, Peshawar Electric Supply Company (Pesco) and others. Privatisation of some Thermal Power generation Stations has also been approved.

Earlier the Cabinet Committee on Privatisation, besides others, had decided that Islamabad Electricity Supply Company and Gujrawanala Electricity Supply Company would be offered for strategic partnerships. It directed the Privatisation Commission to ensure that the interests of employees are protected at all costs.

Minister for water and power Khwaja Muhammad Asif told the National Assembly recently that in order to improve the efficiency of the public sector power entities, some Discos and Gencos are being considered for privatisation. Improvement in the efficiency through competition, accountability, managerial autonomy and profit incentives; and the generation of required resources are the objectives of the government for the privatization of power sector.

“As a matter of fact, all Discos including Pesco are eventually to be privatized. Pesco`s turn may come later but it will,” said a knowledgeable senior source who declined to be named.

To a question on why privatization instead of improving their efficiency, the official said it`s a decision of a government you know with a knack for privatization of PSEs.

Pesco recently planned to privatise three feeders each in Bannu and Dera Ismael Khan but the proposal met stiff resistance from Wapda employees. They instead asked to handover the feeders to them with such incentives as were promised to the private contractors.

Employees fear privatisation would entail joblessness, job insecurity, and costlier energy for the masses and will tantamount to economic killing of lacs of families.

Gohar Taj, the chairman of the all Pakistan Wapda hydro electric central workers union (HECWU) which is the elected collective bodies’ agent (CBA) of Wapda, said the government had on the pressure of IMF decided to privatise Pesco, Lesco and Fesco. It has obtained approval from the CCI through majority.

“Vital national assets were being gifted to political cronies. Wapda workers won’t accept any privatisation or golden handshake offers. Due to our strong opposition, Pesco feeders couldn’t be privatised in Bannu. We will stage demonstrations on March 5 countrywide and on 11 in Islamabad. We will take along sympathetic parties and take the nation into confidence on the hazards of privatisation,” he said.

“The government should revive the loss-making entities with the staff and officers of Discos. CBA will support it. It can take help from the law enforcement agencies to curb stealing, recover dues from defaulters and to arrest corruption within the companies. Pesco employees, I am told, have increased recovery ratio by 10 per cent line losses have been curtailed by one per cent in the last three months. But if goes for privatisation, then it should be known to all that we won’t allow this bandarbant (selective distribution).”

“PPP is labour friendly. It listens to workers grievances and protects their interests but Nawas Sharif government is historically inimical to workers,” he added.

According to him, Wapda was the backbone of national economy till 1994 but now a scourge. “Discos have been destroyed with political intervention by taking political persons and vested interests as members of its BoDs even though they may have no share and therefore stakes to improve their performance. Funds given to improve age-old infrastructure are utilised for extending low-tension lines to benefit politicians which further increases pressure on the national grid and line-losses.”

Tela Muhammad, provincial chairman of the steering committee of the Wapda Pegham union KP, said Nawas Sharif government as usual was bent upon privatising vital national assets.

“We won’t accept offers like the PTCL employees who opted for retaining jobs but are denied due rights since then. We would oppose the move tooth and nail. Privatisation will do no good to consumers as income-hungry private owners of Discos would sell electricity at exorbitant prices. It will only provide the administrative officers of Discos to prepare list of unwilling employees by dubbing them incompetent or corrupt. Privatisation endeavours with regard to feeders have failed earlier. IPPs and RPPs scandals are fresh in minds. They sold power at enormously high rates to regulator which in turn raised power tariff for the people.”

“National institutions need to be improved with the help of all concerned and not to be privatised. If there are corrupt officials, the government has all the resources to arrest, try and punish them. Every employee gives income statement to tax authorities which can be scrutinised and compared with their living style,” he added.

Donor agencies like the World Bank and Asian Development Bank have identified poor governance; political and bureaucratic interference, institutional weakness, and lack of professional management as key shortcomings of Pakistan’s PSEs urging their restructuring and privatization.

But neither privatisation nor nationalisation is solution in itself. Without some institutional and administrative reforms and improvement, any of these will invariably fail.

For many years, the power sector has been virtually in private hands. For example Pepco, headed by an independent MD, manages all the affairs of corporatized nine Discos, four Gencos and a National Transmission Dispatch Company. These companies work under independent Board of Directors (Chairman and some directors are from private Sector). These are administratively autonomous and all entities have the physical possessions of all their operational assets. But the sector’s woes have risen in the meantime.

Similarly feeders in Pesco and other Discos have been privatised in the past but contractors soon fled from the contract. People ask if privatisation of KESC has reaped any dividends. Have the consumers of Karachi benefitted? Has the government got relieved of its subsidies? The government has allocated Rs55bn out of its total power sector subsidy of Rs220bn this financial year to pick KESC tariff differential this year even though it’s long been privatised.

Without structural reforms, stringent laws to punish and deter power stealers, community participation, ending of political intervention, eradicating mismanagement and a sound policy of reward and punishment for both consumers and workers of Discos, even privatisation will be meaningless.

“The government should provide security to raiding teams. Public mind-set should be educated against power theft through media, ulema and teachers. Community intervention can be ensured by assigning areas of responsibility to local bodies’ members at ward or transformer level. Field/line staff deficiency must be removed. Workers should be given commission on extra collection beyond benchmark target at different rates,” said the senior source.

Accountability, power generation especially from hydel and gas and renewal of power infrastructure are also vital for bringing demand and supply gap and line-losses down.

Pesco’s worth and standing

Pesco, according to an estimate, is worth over Rs300bn with all its assets and liabilities.

“Pesco is incurring a loss of Rs1bn a month. Out of the total Rs6.2bn worth units billed, around Rs5bn are recovered. Its total transmission and distribution losses are over Rs75bn at present. But all this is not entirely caused by incompetence and corruption of employees. They have security problems and are attacked by powerful stealing mafia. The police is too over-stretched for the precarious security situation to escort them. Laws against power theft are toothless. A power thief is set free by fining him Rs500-1000. Now this emboldens others to follow suit,” the source said.

“Pesco’s T&D losses are officially displayed at 30-32 per cent but it in reality are 70-80 per cent. Pesco is running in loss because off its 2.7mn consumers, 87.7 per cent are domestic, 10.2 per cent are commercial, only 0.9 per cent are industrial while one per cent fall in other categories. Against this, Fesco, Lesco etc are revenue generators with minimal T&D losses as over 30-35 per cent consumers there are industrial ones. Surprisingly, the government has decided to privatize these income generating Discos,” he added.

The Khyber Pakhtunkhwa Assembly has in 2003, 2005, 2006 and several other occasions passed resolutions against privatisation of Pesco. Abdul Akbar Khan had told the assembly the province had already paid the total transmission and distribution cost of Pesco system,”therefore the NWFP has every right to claim the ownership of Pesco, including its assets, under Article157(2) of the Constitution.

 

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About Tahir Ali Khan
I am an academic, freelance columnist, writer and a social worker.

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