The meeting of National Assembly Standing Committee on Privatisation was held on 06 December, 2022 in Islamabad under the chairmanship of MNA Mustafa Mahmud. Federal Minister for Privatisation Mr. Abid Hussain Bhayo was also present in the meeting.
The meeting of the National Assembly Standing Committee on Privatisation was held on 06 December, 2022 under the chairmanship of Syed Mustafa Mahmud. Federal Minister for Privatisation Mr. Abid Hussain Bhayo, Federal Secretary Privatisation, Dr. Iram A. Khan, CEO MEPCO, representatives from the Ministry of Privatisation and Ministry of Power were also present.
In the meeting the privatization of Multan Electric Power Company (MEPCO) under DISCOs’ privatization program was discussed. The committee considered the performance indicators of MEPCO and its privatization status as it is one of the largest power distribution companies across Pakistan. The MEPCO officials presented the financial and operational data of the company, they also highlighted the challenges being faced due to the pending receivables. MEPCO officials also showed theie reservations on the Competitive Trading Bilateral Contract Model (CTBCM) approved by NEPRA, they expressed that the model has made certain unrealistic assumptions and can impact future privatization or concession contract model being envisaged for the revival of DISCOs. These DISCOs will remain the last resort suppliers but the cost associated with this eventuality is not accounted for by the regulator as well as the standard cost. This unfortunately would not provide the level playing field to DISCOs due to its inherent flaw which will let the Bulk Power Consumer (BPC) to opt for a private sector supplier which are not bearing the same magnitude of cost.
The representatives of the MEPCO also presented/discussed in detail the lead time involved due to the tariff process and its implications for CPPA and other stakeholders.
The NA Committee members expressed their concern over the quality of service in various DISCOs, they raised certain questions for the rationale of such a huge payable to receivables ratio. Moreover, on the matter of such huge accumulated losses and negative equity, members of the committee opined that with these figures, it is highly unlikely for the DISCOs to fetch the right price if these are privatized.
The Federal Secretary Privatisation, Dr. Iram A. Khan apprised the august committee that presently no DISCO is being privatized as management contract or concession agreement model was approved by CCoP and the Cabinet. However, following the interest expressed by Sindh government all other provinces have been contacted/ offered by the Power Division to acquire the DISCOs falling in their respective jurisdictions.
During the course of discussion on provincialisation of DISCOs, the Federal Minister for Privatisation, Mr. Abid Hussain Bhayo highlighted that the Sindh government is already into power generation and transmission, hence it was a logical decision to get into the distribution business as well.
The Committee proposed that the existing DISCOs need to be split further into smaller units and the policy of uniform tariff should also be dropped for the real competitive market to be in place with real cost of service allowed to be charged by the DISCOs to its consumers. This proposed mechanism would have inherent system of checks and balance for poor performing DISCOs to work on their technical and commercial losses so as to reduce tariff for their consumers.
In the concluding session, the chairman directed, that in order to deliberate upon the entire chain of energy sector, the representatives of Power, Petroleum Divisions and their relevant organizatios as well as, NEPRA are to be present in its next meeting as steps are being undertaken as per NEPRA Act, Electricity Policy and National Electricity Plan to improve the performance of these distribution companies. The relevant stakeholders could also justify that privatization of these DISCOs is not yet another experiment at the cost of national exchequer. The committee members expressed that in case of provincialization of the DISCOs province will own and operate these power distribution companies but the generation and transmission will remain with the federal government which would further complicate the already complex power sector in the country.