Privatisation of power distribution companies-II

In Germany, even local government manages power distribution. In India, DISCOs (distribution companies) are provincially managed where these are in the public sector as well.

In Pakistan, both provinces and the federal government have played with the idea of provincialisation of DISCOs. In Sindh, there has been a particular interest in this respect. PPP-led provincial governments are ideologically pro-public sector and labour classes.

They have been interested in taking control of other important enterprises like Pakistan Steel. However, the devil is in detail. The deal does not go through due to financial complications as have been described earlier in the case of privatisation, although such complications may be lesser in case of governments dealing with each other.

To the extent of subsidies, it may be fair to expect that provincial governments may accept the existing and future liabilities. Sustaining people is provincial responsibility and sustaining state is federal, it may be argued.

There may be a formula to share other accumulated losses. The question is why should a provincial government accept the financial liabilities? There may be political and ideological reasons in Sindh, but other provinces may not be interested. A particular issue and difficulty is the political and economic requirement of uniform pricing. It affects welfare, employment and development. Provincialisation or privatisation may disturb this uniform pricing system. Many other possible initiatives are affected by this requirement. A fundamental decision may have to be done in this respect where provinces may compete with each other in terms of resource allocation, pricing and investments.

Would smaller provinces like that? Certainly not! K-P may? Some circles in K-P have been demanding pricing autonomy in energy sector but are not willing to pay costs elsewhere.

Uniform pricing policy may have to be removed or kept simultaneously in all provinces. Benazir Bhutto government announced a special electricity tariff for Swabi, which could not be sustained for long? The question is why provincialisation; from fire into frying pan? If government is bad, it is so, both in federation or province. It may, in fact, be worse.

The influence of chieftains, elite and vested interests is much more in provinces. Provinces are not able to collect taxes. Will they be able to collect electricity bills, directly or indirectly? Are provinces able to manage public services like water, sewerage and solid waste, which are under their domain?

It may happen that DISCOs may have to be reverted back to centre after being worsened by provincial administrations.

Segmentation and restructuring

Perhaps, the first priority should be restructuring and segmentation. Most DISCOs are spread over a large area.

For example, Pesco starts from DI Khan through Kohat, Peshawar, Nowshera to Mansehra. It is an area of 12,000 square km, too remote and widespread for management to effectively control. Regional managers have their fiefdoms with all kinds of vices, problems and issues. Similarly, other DISCOs like Mepco have the same issues. Both are among top loss-making enterprises. Smaller companies may make these financially slim to attract local private sector. This does not require any prerequisite. It can be done without loss of time and much complication.

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