DISCOs being transferred to provinces to reduce burden on federal government

Engineering Post Report

The federal government has decided in principle to transfer all power distribution companies, DISCOs, to the provinces instead of their privatization in order to reduce burden on the national exchequer.

In this regard, the federal government is involved in the process of consultations at the appropriate level in order to enlist their willingness and support for taking over administrative control of the power distribution companies falling in their jurisdictions.

The persist nt chronic issues of high  transmission and distribution losses with an average of 20.34  up to June 2021, low percentage of recovery of  outstanding liabilities (mean recovery of as high as 88.51 per cent reported for DISCOs till June 2021 ) and weak governance system  have hackled the power distribution  of Pakistan.

The unrealistic  targets  set by the regulator  in respect of investments have  created an investment gap in the DISCOs and they fail to achieve desired results due to overall  governance issues.  Quite obviously, consequently the Circular Debt was also building  at an increasing and alarming rate and has already reached the level of Rs 2.6 trillion mainly due to electricity theft and low recovery besides other factors. All DISCOs had reported  losses amounting to about Rs 300 billion  during last financial year. For some time , the federal government has also been exploring possibilities of placement of the independent Board of Directors and option of  outsourcing  of DISCOs   management functions and operations without transferring ownership  and also an area franchising structure for improvement in DISCOs  efficiency with a clear transaction structure.

As per the latest policy decision taken by  the federal government on express direction of the prime minister, 5 DISCOs of Lahore, Faisalabad, Gujranwala, Multan  and Islamabad will go to Punjab province , two of  Hyderabad and Sukkur to Sindh province, another two DISCOs of Peshawar and Tribal Areas will go to Khyber Pakhtunkhwa (KPK) and one of Quetta to Balochistan province

Even after transferring administrative control of DISCOs to the province in due course of time , the federal government  will retain its control over electricity  generation and transmission system. The provinces will also be given  power to  take the decisions for effectively reducing  electricity theft, loadshedding schedule and subsidy to the customers in  their respective areas.

Distribution companies  function under the Pakistan Electric Company (PEPCO) and are responsible  for distribution of power to the domestic and other categories of customers  in their respective allocated areas.

They buy  power from WAPDA, PEPCO and other Independent Power Producers (IPPs) and sell it  in their areas. All DISCOs are owned by the federal government except K-Electric (formerly Karachi Electric Supply Corporation (KESC) which was privatized way back in 2005.