Finance ministry opposes new power sector management proposal

Finance ministry terms proposal in violation of SIFC decision

ISLAMABAD:

The finance ministry has not supported an official proposal to appoint senior armed forces officers as heads of new Performance Management Units (PMUs) in the rotten power distribution companies to improve their management. 

But the finance ministry backed the original decision of the Special Investment Facilitation Council (SIFC) to give a role to the armed forces in an ongoing anti-electricity theft campaign. 

A senior official of the Ministry of Energy said a few days ago that the army also did not want a role in the management of the power distribution companies and the proposal was floated by the energy ministry to involve the armed forces.

The proposal of setting up new PMUs and appointing senior army officers as heads had not been floated by the SIFC. It was rather the idea of the Power Division, which the finance ministry did not support.  

Sources in the Ministry of Energy told The Express Tribune that the Ministry of Finance has not supported its summary to the federal cabinet for handing over the management of the power distribution companies to the army, police and intelligence agencies.

The energy ministry wanted to set up new PMUs in distribution companies under the command of brigadiers. 

Sources in the energy ministry said that the finance ministry termed the proposal in violation of a decision of the SIFC that had approved giving the army a role only to the extent of an anti-theft campaign. 

Despite repeated attempts, the spokesman of the finance ministry, Qamar Abbasi, did not reply to questions regarding the ministry’s position on the involvement of the military. 

In a summary prepared for the federal cabinet, the Power Division proposed that new PMUs should be established in all power distribution companies and a grade 20 officer of the armed forces should head these units.

It proposed to begin a pilot project in the Hyderabad Electricity Supply Company (HESCO) under the command of the brigadier who would directly report to the federal secretary power, Rashid Langrial.  As per the proposal, the unit would also consist of officers from the Pakistan Administrative Service (PAS), FIA and intelligence agencies. 

The summary also sought the deputation of the senior army officer along with his team and allied staff, for strengthening the management of each DISCO. It also requested the Ministry of Defense to post one officer from sensitive agencies in each DISCO. 

The cabinet’s nod was also sought for appointing a serving police officer of BS-18 in each power distribution company for coordination with police authorities in the anti-theft campaign.

However, the sources said that the finance ministry has completely opposed the involvement of the military in the management of the power distribution companies, as no such proposal was given by SIFC. 

The finance ministry was of the view that the SIFC had decided that an anti-theft task force should be attached to the power distribution companies and there was no decision regarding the new PMUs. 

The finance ministry also raised questions about the additional cost of setting up these management units that the crumbling power sector will have to bear. Concerns were also raised over the lack of experience in managing the power sector. 

The interim government had begun a campaign against electricity theft. Secretary power said on Monday that so far Rs63.6 billion in savings have been ensured under the anti-theft drive, including Rs51.1 billion cash recoveries. 

However, the Circular Debt Report for October 2023 revealed that the power distribution companies’ performance has further worsened during the first four months of this fiscal year. 

The power sector circular debt jumped from Rs2.310 trillion in June to Rs2.61 trillion in October –a net increase of Rs301 billion in just four months. Out of the Rs301 billion increase, an amount of Rs242 billion or 80% of the additionality, was on account of inefficiencies and less recovery of the bills by these power distribution companies. 

The losses due to “inefficiency” were Rs77 billion in just four months. Similarly, these distribution companies collected Rs165 billion less in electricity bills in just four months. 

The Secretary power’s presentation this week also revealed that honest electricity consumers were robbed of Rs675 billion.

The additional amount is collected through over-billing and charging them higher than the generation cost to pay subsidies to other consumers.  

The Power Division has admitted that the past efforts to appoint talented chief executive officers of these power distribution companies have failed and as a result, the power sector has been beset with inefficiencies.

The power distribution companies have also failed to recover Rs1.8 trillion from the consumers and the government has now started the anti-theft campaign. The energy ministry has estimated that these power distribution companies are expected to make another loss of Rs589 billion in this fiscal year due to less recoveries of bills and theft of electricity. 

It has admitted that there was rampant mismanagement in the power sector; the whole process for further reforms has been derailed.

The energy ministry feared that weak leadership in these power distribution companies may also derail the anti-theft campaign.

The energy ministry stated that Hyderabad, Sukkur, Peshawar and Quetta power distribution companies were facing serious capacity limitations and required administrative assistance.