A shoddy consensus

In theory, the government has agreed to put the Gencos up for sale, but is only soliciting interest in the DISCOs.

It does not bode well for a policy when the only way the government is able to get the required consensus is by proposing an alternative that is acceptable to nobody. After the provinces refused to take on the burden of running the power distribution companies (DISCOs) themselves without also being given control over the power generation companies (Gencos), the Nawaz Administration finally got its wish: it will be able to proceed with the privatisation of the state-owned DISCOs. Unto itself, the privatisation of the DISCOs is a good idea. The example of the privatised Karachi Electric Supply Company demonstrates that private companies are able to realign the incentives of consumers to significantly reduce electricity theft. But while we are not opposed to privatising the DISCOs, we are left asking why the government is so reluctant to privatise the state-owned Gencos. In theory, the government has agreed to put them up for sale, but is only soliciting interest in the DISCOs. Why?



The provinces were correct in pointing out that being given control over distribution without any control over generation would be a meaningless transfer of authority. At first, one might have chalked this up to the government’s desire to go ahead with privatisation, but now it seems that it is not even being privatised.

There is as much corruption, incompetence and waste in the Gencos as there is in the DISCOs. How does the government plan to fix that part of the problem? Most analysts agree that the problem with Pakistan’s energy system is split almost evenly between the cost of theft and the inefficiently managed state-owned power generation system. Privatisation of the DISCOs would, at least, begin to move the country towards solving the first half of that problem. But what exactly is the government’s plan for the second half? And, more importantly, why does the government refuse to comment about this specific portion of the energy policy in virtually any of its pronouncements on the matter? Given the rapid build-up in circular debt once again, the government had better come up with a strategy to fix the problem, and do it as quickly as possible.

Published in The Express Tribune, February 13^th,  2014.

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