The Power Division revealed on Monday that provincial governments seem uninterested in purchasing the Distribution Companies (Discos), with the first phase of privatization set to move forward, involving the outright sale of three Discos.
Dr. Fakhre Alam Irfan, Secretary of Power, told the Senate Standing Committee on Power that despite sending letters to provincial Chief Secretaries offering them the chance to purchase Discos in their regions, no responses have been received, indicating a lack of interest in these acquisitions.
This follows the Prime Minister’s directive to explore the possibility of transferring ownership and control of Discos from the federal to the provincial governments. The privatization plan will be carried out in consultation with the provinces, with a detailed roadmap and timeline to be submitted to the Prime Minister for approval.
Dr. Irfan updated the committee on the government’s approved privatization strategy, which includes the privatization of IESCO, FESCO, and GEPCO in the first phase, followed by LESCO, MEPCO, and HAZECO in the second. A third phase will involve concession agreements for HESCO, SEPCO, and PESCO, while TESCO and QESCO will remain under federal control.
The process for hiring a Financial Advisor (FA) for the privatization is underway. After an initial tender was canceled, two FA consortiums have now applied, and Dr. Irfan expects a final decision within two weeks. Additionally, the transfer of shares from WAPDA to the President of Pakistan and then to the respective Discos is expected to be completed by January 31, 2025.
Senator Syed Shibli Faraz proposed a strategy to attract investment by offering potential investors one well-performing Disco alongside a poorly-performing one, making the investment more appealing. He also raised concerns about the overall performance of Discos and pension-related issues in the sector.
Dr. Irfan acknowledged past mismanagement but assured that efforts are underway to reduce consumer tariffs, particularly for industries, improve recovery, and lower losses in line with NEPRA’s benchmarks.
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In line with efforts to reduce tariffs, Dr. Irfan informed the committee about ongoing negotiations with Independent Power Producers (IPPs) and various measures to cut electricity costs. Contracts with five IPPs have been terminated, leading to savings of approximately Rs. 411 billion. Furthermore, revised agreements with 8 Baggasse Power Plants and 14 IPPs under earlier power policies could save an additional Rs. 238 billion.
The government’s strategy also includes hybrid model agreements with IPPs from the 1994 and 2002 power policies, allowing only the recovery of operational costs, which is projected to save Rs. 802 billion over the remaining life of the projects. Overall, these efforts are expected to result in savings of up to Rs. 922 billion.
The Committee discussed ongoing restructuring plans at the National Transmission and Dispatch Company (NTDC) and the appointment of new CEOs and management in Discos. Dr. Irfan confirmed that no jobs would be lost during the restructuring process and emphasized that new boards are being appointed to oversee the management of these entities.
The committee also planned to hear from NTDC Chairman Dr. Fiaz Ahmed Chaudhry regarding the 10-year generation and transmission plan at the next meeting. While the Minister for Power was unable to attend due to a family bereavement, Dr. Irfan assured the committee that the government was working on reducing tariffs by June 30, 2025.