Govt dissolves boards of power companies

Action part of energy sector reforms pushed by the International Monetary Fund (IMF) to overhaul the bleeding sector.

ISLAMABAD: The government on Monday abolished the board of directors (BoDs) of all power generation, distribution and transmission companies as part of energy sector reforms pushed by the International Monetary Fund (IMF) to overhaul the bleeding sector.

The latest step, the second in a series, will help achieve another milestone set by the IMF for the restoration of the suspended $11.3 billion bailout programme. Earlier, the authorities announced the abolishment of Pakistan Electric Power Company from June 2011. The government has installed a transition team to manage affairs meanwhile.

“In the wake of ongoing power sector reforms, the existing BoDs will cease to function immediately,” says an official release.

An official of the ministry of water and power said that till the formation of new boards the chief executive officers of these companies will take operational decisions whereas the policy decisions will be left pending for new boards. He said that the government may constitute new boards before the end of the calendar year.

The government has got rid of the boards of nine power distribution companies, four power generation companies and a transmission company.

The power distribution companies are from Faisalabad, Lahore, Multan, Gujranwala, Islamabad, Hyderabad, Sukkur, Quetta and Peshawar. High line losses due to inefficiencies in these companies and theft are considered the main reasons behind the collapse of the power sector, which has also crippled the economy.

The IMF has put two major conditions for the restoration of $11.3 billion bailout programme that has been suspended since May. It has told Pakistan to implement the reformed general sales tax regime and overhaul the power sector by phasing out electricity subsidies, resolving inter-corporate debt and constituting new boards of power sector companies.

According to Finance Minister Hafeez Shaikh, if the government leaves the power sector in its existing condition it would cost the national exchequer Rs256 billion till June 2011. Inter-corporate debt has also increased to Rs426 billion. The government has parked Rs301 billion in a holding company and is paying an annual interest of Rs40 billion on that.

The cabinet committee on reforms has set broader guidelines for the formation of new boards. The guidelines state that the size of the proposed boards may range between eight and ten members and the proposed names of members must contain the right mix of government and private sector professionals with a greater leaning towards the private sector.

A regional balance will be maintained in the nominations as well. Moreover, gender balance will be kept in focus while making nominations to the boards. The nominees may also reflect a balance in their ages, with a view to grooming a second generation of private sector individuals. At least one member on the boards should be a young private sector individual with the potential to make his mark in the future.

The release says that ministers, secretaries and government officials will not be nominated as chairman of the board. The office of the chairman and CEO will be kept separate as well.

Published in The Express Tribune, November 23^rd, 2010.