Special Assistant to Prime Minister on Power Tabish Gauhar has suggested the privatisation of five power distribution companies in Punjab in the first phase after clearing their loans to improve the balance sheet and enable them to borrow from banks for restructuring.
During discussions in a meeting of the Cabinet Committee on Privatisation (CCOP), he commented on the draft report prepared by a working group and suggested that it would be more appropriate to privatise five distribution companies in Punjab in the first phase and the remaining three more challenging distribution companies in the second stage.
He stated that it would be appropriate to clarify the terms of concession as those were being misunderstood in the sale of distribution companies. Rather, those are management contracts.
He stressed the need for cleaning balance sheets of distribution companies by clearing loan liabilities and swapping the receivables of government departments with equity, which would help the distribution companies borrow from banks for their functional restructuring.
The SAPM on revenue highlighted that the phrase ‘privatisation’ was creating anxiety and unrest among employees of the distribution companies, which might make it more difficult to achieve objectives of the government policy.
Therefore, there was a need to clarify the process, which was more a management contract rather than privatisation. This will help achieve confidence and acceptability from the stakeholders, especially the staff working in those organisations.
Finance Minister Abdul Hafeez Shaikh expressed his dissatisfaction and concern over the delay in privatisation process. He stated that a lot of time had elapsed since first directive of the CCOP in 2018.
After that, the CCOP gave directives for expediting the process but nothing concrete happened. He called for updating the earlier directives of the government and reviewing the progress made on each directive so far.
He emphasised that there was a dire need to implement the CCOP decisions expeditiously by engaging all the ministries and divisions concerned. He gave directives for preparing a simple proposal as a way forward with a proper timeline instead of developing complex transaction structures. He assured his full support and assistance to expediting the process.
The Privatisation Division informed the cabinet body about the progress made on the subject, as reflected in the summary. It was informed that past attempts to privatise the distribution companies could not reach maturity due to multiple problems and complexities, especially the protests by labour unions against privatisation.
After deliberations by the stakeholders, a working group consisting of representatives of the Privatisation Commission, Power Division, Pakistan Electric Power Company (Pepco), Central Power Purchasing Agency-Guarantee (CPPA-G) and National Electric Power Regulatory Authority (Nepra) was constituted for identifying the most optimal and prudent roadmap, including the transaction structure and sequencing. A team of local and international experts was also taken on board with support of the World Bank.
It was highlighted that the report prepared by the working group emphasised the need for communication and agreement with the staff of distribution companies.
It recommended that the transaction of distribution companies may be undertaken in batches and prior actions pertaining to Nepra and Power Division may be completed in parallel. After examining various options, following was recommended for private sector participation in the management of distribution companies.
First, a concession model was recommended as the main form of bringing private participation for a majority of eight distribution companies, other than the Quetta Electricity Supply Company (Qesco) and Tribal Areas Electricity Supply Company (Tesco).
It also proposed a management contract for Qesco and Tesco. The report containing a roadmap and timelines was submitted by the Privatisation Division for review by the CCOP. It was requested that the Privatisation Commission may be allowed to submit a firmed-up proposal, including the sequencing and hiring of financial advisers along with recommendations of the Privatisation Commission board by the first week of April 2021.
Published in The Express Tribune, March 26th, 2021.
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