PEPCO eyes role of ‘managing agent’
PHOTO: REUTERS
The draft of an agreement to make the Pakistan Electric Power Company (PEPCO) the ‘managing agent’ of 10 distribution companies (DISCOs) has been handed over to them under a major plan for paving the way for the privatisation of the organisations.
All the DISCOs of Punjab have included the approval of the agreement in the agendas of their board meetings.
After the agreement, the power of appointment, transfer, purchase and inspection of material, and direct payments will be withdrawn from the DISCOs and their income will go to the Central Power Purchase Agency's account.
Five to eight per cent of the companies' shares will also be sold later under the plan.
PEPCO handed over the draft of the 31-page Managing Agent Agreement to the 10 DISCOs. According to official documents, the role of the DISCOs will be reduced after the agreement is approved by their boards of directors and powers, including those related to policy making, will be transferred to PEPCO. Following the agreement, the chief executive officers, chief financial officers, directors legal, directors human resource and company secretaries of the distribution companies will be hired and paid salaries according to the market standards.
The DISCOs will pay a part of their revenue to PEPCO as management fee, depending on the number of their customers and employees.
According to sources, the move is being pursued by a lobby in the power sector. They said a general manager of PEPCO was approaching various power distribution companies along with legal advisers and pressuring the chief executives to sign the agreement as soon as possible.
As a result, in just five days, six power distribution companies, including FESCO, MEPCO, LESCO, GAPCO, IESCO and PESCO have put it on the agendas of their boards of directors.
The sources said this was the first step towards privatisation of power distribution companies. In the next phase, five to eight per cent shares of the companies will be offered for sale.
However, the Secretary General of the Institution of Engineers Pakistan (IEP), Amir Zameer Khan, said the move by the bureaucracy was a matter of grave concern for the engineers. Talking to The Express Tribune, he said the power sector had already suffered due to such experiments. He said the fresh move would end the autonomy of the companies.
Engineer Amir Zameer Khan added that PEPCO’s constitutional status was questionable because it had been set up for a specific period. He said major donors in the power sector, including the Asian Development Bank and the World Bank, had repeatedly called upon the government to abolish PEPCO.
He said the National Electric Power Regulatory Authority (NEPRA) fixed the tariff for each company according to its losses. After centralisation, the consumers of companies with lower losses will also have to bear the same burden as those with higher losses. He said the DISCOs were formed from the Water and Power Development Authority 22 years ago with the approval of the Economic Coordination Committee, but it had not been consulted regarding the fresh move.
The IEP office-bearer said the engineers had resisted such measures in the past and they would launch a movement if the managing agent formula was not withdrawn.
However, a spokesperson for the power division said a central monitoring body was needed for the uniform implementation of reforms in the power distribution companies. Through the agreement, DISCOs and PEPCO will be closely linked so that they can support each other. He said the agreement would not change the administrative or financial powers of the boards of directors of DISCOs. PEPCO will play the role of advice and support, and the agreement will not in any way affect the powers of the board of directors or management, he added.
He said all the power distribution companies and PEPCO would sign the management agent agreement y he end of this month for the next five years.
Published in The Express Tribune, September 8th, 2020.