Sunday March 26, 2023

Sindh mulls conditional control of HESCO, SEPCO

February 02, 2023

ISLAMABAD: Sindh government was willing to control HESCO and SEPCO, but with zero liability and permission to offload 49 percent shares to a private company along with management, sources in Sindh’s power and energy divisions told The News.

“However, the bureaucracy in Islamabad is not in favour of offloading 49 percent shareholding of each DISCO, but is endorsing handing over management to the private sector,” top officials privy to the development told The News.

The Sindh government’s argument was that if the private management did not have a sizeable shareholding and stakes in the DISCOs it might not perform up to the mark, they said. “The private management would perform only when it would have monetary stakes in the DISCO.”

When the DISCOs would be handed over to the provincial governments with 51 percent shareholding, then the provincial government would enforce the writ and extend help to the private management effectively in terms of coping with the theft of electricity and recovery of bills.

The federal government, they said, wants to hand over the DISCOs to provincial governments and to this effect, the Sindh government was the first one that has shown a positive response, but with some prerequisites.

In the past, PTI government had initiated back door dialogue for handing over SEPCO and HESCO to the Sindh government, but somehow the talks could not advance on the said issues

The PTI government had tailored a plan to offer management contracts of all the DISCOs to the private sector, through a competitive bidding process and incremental revenue sharing basis aimed at bringing down losses and improving recovery.

Under the PTI government plan, the new managements were to be allowed to constitute their own boards of directors and powers to offer the voluntary separation scheme (VSS) to the employees. However, the private sector management would not have been allowed to terminate the service of any employee.

The circular debt in the power sector has increased to Rs2.4 trillion mainly because of electricity theft and low recovery of bills. There are also many factors that contribute to circular debt. As per the latest evaluation report of NEPRA 2021-22, SEPCO’s transmission and distribution losses stand on the higher side at 36 percent and HESCO’s at 25.40 percent.

In addition, PESCO’s losses stand at 37.23 percent – the highest among all DISCOs. However, IESCO is the best and most efficient among the DISCOs as its losses stand at 8.18 percent.

However, GEPCO’s loss remained at 9.07 percent, LESCO’s at 11.50 percent, MEPCO’s at 14.70 percent, and K-Electric’s at 15.30 percent. Right now the total losses stand at 17 percent.

Overall, the financial loss born by the National Exchequer in FY 2021-22, in the wake of transmission and distribution losses, stands at around Rs122.6 billion.

In FY 2021-22, around Rs2,517 billion were collected against the billed amount of Rs2,686 billion, showing that a total loss of around Rs170 billion has to be suffered by the National Exchequer for FY 2021-22.

In this regard, the highest contributor is QESCO followed by SEPCO and HESCO. It is evident that less recovery of such a huge amount has mainly contributed to increasing the circular debt of Pakistan.