Handing over Discos to Private Sector is No Solution

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Every decade or two, the then government of Pakistan comes up with a new idea to solve the problem of the power distribution companies – Discos – and hopes this will replenish the government’s coffers. The current caretaker government’s recent decision to “hand over loss-making power distribution companies to private sector through long-term concessions” is another such attempt.

 

However, as an editorial in Dawn notes the decision “comes across as vague. News reports suggest that the proposal to transfer the Discos to the private sector through concessions was one of three options put forward by the energy ministry at a recent meeting of the Special Investment Facilitation Council. The other two solutions put on the table were older: provincialisation and privatisation of the Discos.”

 

These companies “have been a constant source of deep worry for successive governments. The large distribution losses, revenue leakages, low bill recovery, huge electricity theft and supply constraints plaguing these companies have put them at the centre of Pakistan’s power sector woes.”

 

As the editorial noted, “in the past, various options, including privatisation and provincialisation of Discos, have been debated to fix the staff-heavy, inefficient, and mismanaged companies. Not one could be implemented for several reasons. The option of provincialisation means that their losses would be transferred by the centre to the provinces. Their privatisation seems impossible because these are monopolies and typically very large companies — both financially and geographically. Resistance from their staff is also a major impediment to privatisation. No effort to sell any Disco barring K-Electric has succeeded in the last 20 years because of these reasons.”

 

In conclusion, the editorial asked, “difficult to say how the new plan — which doesn’t seem to go beyond rhetoric — will counter these obstacles. The practical and quicker way to the problem lies in breaking the monopoly of these companies by exposing them to private competition. Private investors must be encouraged to set up new, smaller power distribution companies by allocating them specific areas and allowing them to use the existing distribution network of the Discos for a reasonable fee. This will be in line with the government’s plan to create a competitive electricity trading market in the country and provide consumers a choice, besides exposing the Discos to competition and forcing them to improve their services and cut losses.”

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Author: Alia Khan