CCOP okays outsourcing of Discos’ management

ISLAMABAD: The Cabinet Committee on Privatization (CCoP) in a meeting on Friday asked the privatization commission to outsource the management control of Power Distribution Companies (Discos) instead of their complete privatization.

Earlier, government had decided to privatize the Discos in Pakistan. Cabinet Committee took the decision while considering a summary of Private Sector Participation in Management of DISCOs.

On January 4, 2021, the Cabinet Committee directed the Privatization Commission to expedite privatization/management contracts relating to DISCOs in consultation with the Power Division for consideration of CCoP.

The source disclosed that Power Division was also directed to expedite completion of requisite actions prior to the privatization in this regard.

In compliance with the CCoP decision, PC requested the Power Division for the provision of requisite information/clarifications. Power Division initially provided some information and subsequently also indicated the following objectives to proceed further on the subject matter.

i): Reduce ATC losses of each disco to the level allowed by NEPRA;

ii): Improve the quality of services delivery and consumer satisfaction; and

iii): Raising monetary proceeds is not a consideration.

In order to arrive at a viable plan, Commission held consultative meetings with Power Division, both at the Ministerial and working levels. They also discussed the issue in the Board of Privatisation Commission. After detailed deliberations and keeping in view the diverse complexities of the power sector, a “Working Group” consisting of representatives from PC, Power Division, PEPCO, CPPA-G, and NEPRA was constituted to develop a most optimal & prudent road map for the transaction.

It took a team of local and international experts on board with support from World Bank. The Working Group met over several weeks and prepared a report.

The Working Group after examining various international models, for bringing in efficiency& effectiveness in operations of distribution companies, has proposed the Concession Model for 08 of the DISCOs whereas Management Contract Model has been proposed for QESCO and TESCO.

The report lays emphasis on the completion of several key steps for the transaction, as a robust communications strategy, early engagement with labor unions, besides regulatory certainty, predictability, a multi-year tariff regime, and other prior actions mainly pertaining to NEPRA and

PC had submitted a Summary of the subject matter and discussed in the CCoP meeting held on March 18, 2021. The CCoP directed the Privatisation Division to submit an action plan before CCoP with clear timelines for each entity.

Privatisation Commission Board convened a meeting on March 24, 2021, to deliberate on the CCoP directions. SAPM on Power also participated in the Board proceedings as a special invitee in order to firm up a consensus-driven proposal for the CCoP.

The PC Board recommended the following course of action.

Concessions or Management Contacts are the most optimal options for the private sector participation in the management of DISCOs; PC to undertake the hiring of a Financial Advisory Consortium (FAC) of international repute having pertinent experience of the sector in the technical, financial, legal & regulatory fields on a priority basis.

On the basis of a due diligence review, the FAC shall recommend a specific transaction structure (Concession or Management Contract) for each DISCO separately, along with sequencing of the transaction.

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