- Meeting of PM-constituted committee discusses transfer of Discos at length
- KP links Pesco takeover with ownership of hydropower generation to province
- Defense Minister to chair next meeting of committee on April 17 and 18
ISLAMABAD: The committee headed by Defense Minister Khawaja Asif on transfer of power distribution companies to the provinces has submitted its preliminary report to the Prime Minister on transfer of the ownership of DISCOs to the provinces.
According to sources, the Sindh government has shown willingness to take ownership of Hyderabad Electric Supply Company (HESCO) and Sukkur Electric Supply Company (SEPCO), but the Khyber Pakhtunkhwa government has refused to take over the Peshawar Electric Supply Company (Pesco), linking the Pesco takeover with the ownership of hydropower generation to the province.
Sources recalled that during the recent meeting, the Defense Minister proposed evolution of a mechanism for power purchase among the provinces. They said that Chairman National Electric Power Regulatory Authority (NEPRA) supported the transfer of DISCOs to the provinces in phased manner, while the Law Secretary proposed to issue the shares of distribution companies (DISCOs) in the stock market. They said the Secretary Law recommended privatization of 26 percent stakes in some companies (DISCOs) with management control. The next meeting of the committee headed by Defense Minister Khawaja Asif will be held on April 17 and 18 for negotiations with the provincial governments of Punjab and Balochistan on the matter of transferring the ownership of electricity distribution companies (DISCOs) to the provinces, said sources.
Sharing details of the meeting, the sources said that the committee constituted vide Prime Minister’s Office’s U.O. No. 118/M/PSPM dated March 17, 2023 regarding transfer of DISCOs to provinces was held on March 24, 2023 under the chairmanship of Minister for Defence Khawaja Asif in the committee room of power division.
During this meeting, Sindh Minister for Energy Imtiaz Sheikh stated the Sindh government is keen to take over the two DISCOs – SEPCO and HESCO since long, elaborating the provincial government has already hired the services of a consultant for the purpose. He requested that as indicated by the Minister for Finance and Revenue during a meeting with the Prime Minister, due diligence conducted by the federal government pertaining to SEPCO and HESCO may be shared with them. He also emphasized that ten days’ time for submission of recommendations by the committee is too short. He requested that Sindh government may be given time to complete due diligence by a transaction advisor it has hired for the purpose.
As per sources, the main points of discussion during the meeting disclosed that Federal Minister for Commerce recommended that that the transfer of DISCOs may not be done in haste since it might make the whole exercise unsustainable. He emphasized that due diligence may be conducted through the appointment financial consultants from both sides.
The Minister of State for Petroleum highlighted the possibility of “Navigation” in case provinces start their own generation. He emphasized a cautious approach, suggesting a comprehensive evaluation of the outcome with the need for taking a holistic view rather than only considering distribution of electricity. He also expressed his concern about the possibility of price differential across various regions of the country that will raise issues of equity and regional marginalization.
Present on the occasion, the federal minister for power division highlighted various issues to be addressed including the responsibility of accumulated losses of DISCOs and responsibility of future losses etc.
The representative of Privatization Commission highlighted that in 2015-16 due diligence in respect of some DISCOs was carried out by the federal minister for finance and revenue for finance loss-making DISCOs were not included. No due diligence was conducted in respect of HESCO and SEPCO. He stated that copies of earlier studies can be provided.
The Advisor to KP Chief Minister highlighted the precarious situation of the province with respect to financial constraints, law and order and issues arising out of merger of Fata. He stated that KP is not able to take over the high loss-making DISCOs. However, the Chief Minister has consented that they will look into the matter if hydel generation is handed over to the province. The Advisor also said that selective application of constitutional provisions may be avoided, and all the relevant articles of the constitution may be read and applied in totality as far as the power sector is concerned.
Speaking on the occasion, the Chairman commented that on the basis of comments of stakeholders, he suggested the appointment of a Financial Advisor on federal level to submit a report in the matter. Comprehensive ToRs of the consultant to be prepared and preferably local expert be appointed. He also mentioned about the Indian experience, opining such experience could be replicated for local befit. He also advised to study the concept of “Energy Exchange” where provinces can buy electricity from each other.
The NEPRA chairman who joined the meeting virtually stated that CTCBM (Competitive Trading Bilateral Contract Market) will be operational by May 2023. He was supportive of the proposal to hand over management control of DISCOs to provinces. He advised that the transaction may not be done as a whole and instead it may be carried out in piecemeal. Let the Sindh government may take lead and the two DISCOs may be transferred first. Only financial aspect is not enough to be looked into and the matter also needs political decisions as well. He also advised privatization of DISCOs including floating out shares on the stock market.
The Secretary Law proposed management transfer with sale of 26 percent shares rather than an outright transfer of 100pc shares.
After detailed deliberation, the sources said that the Chair concluded the session with some decision including next meeting may be held on 17th or 18th April, 2023, the case for extension in time may be taken up with the Prime Minister, some spade work on the basis of above discussion as well as ToRs of the committee may be carried out, the matter of privatization including floating of 26% shares on stock market may also be looked into etc.
It is pertinent to mention that Shehbaz Sharif-led coalition government is giving a serious consideration to transfer of power distribution companies (DISCOs) to provinced for which Prime Minister Shehbaz Sharif has constituted the 11-member committee.
The committee is comprised of Minister for Defence Khawaja Muhammad Asif (Chair), Minister for Power Khurram Dastgir Khan, Minister for Commerce Syed Naveed Qamar, Minister of State for Petroleum Musadik Malik, provincial chief ministers and ministers nominated by CMs, Dr Muhammad Jehanzeb Khan, Special Assistant to Prime Minister on Government Effectiveness, Finance Secretary, Secretary Power (Secretary of the Committee), Secretary Privatization Commission, Secretary Law & Justice and Provincial Chief Secretaries.
The committee may co-opt member(s) from regulatory bodies such as the National Electric Power Regulatory Authority (NEPRA), Securities & Exchange Commission of Pakistan (SECP), Competition Commission of Pakistan (CCP) etc. for input on any regulatory aspect if required.
As per the Terms of Reference (ToRs) of the committee, it shall examine the current constitutional framework for the transfer from federal government to respective provincial governments. It shall also chalk-out the list of legal requirements that have to be complied, and if needed, suggest a legal framework specific for the purpose.
Likewise, the committee shall examine requirements of NEPRA with regard to the change of ownership of its licensees and the steps involved therein as also examine regulatory requirements of other regulators including the SECP, SBP, and CCP and outline the compliances required for the transfer of ownership of equity.
It shall draft intent, principles and the scope of the framework agreement to be signed between the federal and provincial governments regarding the mechanism for the transfer.
Similarly, it shall recommend the principles and parameters for transfer through an agreed transitional plan, eventually leading to full provincial responsibility for sustainable financial functioning of the DISCOs.
Besides, Dr Syed Tauqir Shah, Principal Secretary to the Prime Minister has informed the secretary power and all concerned about the development in a letter dated 17th March 2023.
