Support units proposed for distribution firms

Power Division acknowledges failure to address inefficiencies, mismanagement

ISLAMABAD:

The Power Division has admitted its failure to overcome inefficiencies and mismanagement in the energy sector, which resulted in accumulation of circular debt in excess of Rs2.310 trillion.

Now, the division is betting on setting up support units for power distribution companies (DISCOs) comprising officials of intelligence agencies and law enforcement agencies to address challenges and curtail the circular debt.

Receivables of DISCOs had piled up to Rs1.786 trillion, making the sector unviable and it was apprehended that during financial year 2023-24 those companies may have suffered a loss of around Rs589 billion, which included under-recoveries and losses above the threshold defined by the National Electric Power Regulatory Authority (Nepra).

While assessing how to strengthen the management of DISCOs and establish support units in a recent meeting, the Cabinet Committee on Energy was briefed by the Power Division that after unbundling the Water and Power Development Authority (Wapda), electricity distribution business was entrusted to 11 DISCOs across Pakistan, excluding Karachi which was being served by a private company.

Efficient management of DISCOs, under the Ministry of Energy (Power Division), had always been a challenge to the government. Various models had been experimented in the past for bringing about improvement in DISCOS, but such efforts did not yield any worth considering results. As a consequence, the power sector has been beset with inefficiencies for decades.

The committee was informed that it resulted in accumulation of circular debt in excess of Rs2.310 trillion. Since DISCOs were created for the adoption of corporatisation model and quick service delivery, it was envisaged that the distribution system would improve.

However, due to rampant mismanagement, required reforms have been derailed. Resultantly, these entities have now become a constant source of bleeding for the national exchequer.

In order to minimise losses, the government launched a campaign on September 7, 2023 to check electricity theft and make recoveries from defaulters. However, it was feared that DISCOs may not be able to achieve desired results despite support from federal and provincial governments.

The Power Division said that in order to ameliorate the situation, the proposal for establishing DISCOs’ support units was floated and discussed in the executive committee of the Special Investment Facilitation Council (SIFC) in meetings held on April 24, 2024 and May 13, 2024.

The division emphasised that in order to strengthen the management of DISCOs and to have efficient monitoring, support units were critical.