Govt decides to lease out Discos for 30 years

ISLAMABAD: The government has shelved its plan to privatise the loss-making power distribution companies (Discos) or hand them over to the provinces and has come up with the idea of striking concession contracts for leasing them out for 30 years.

The brownfield projects would be handed over to the private sector through PPP (Public Private Partnership).

Under the concession contracts, there would be five major responsibilities, including running the brownfield project, maintaining and returning it after exhausting the contract period. The Project Monitoring Unit (PMU) is also proposed to be established to run it under the obligation of concession contracts.

Top official sources confirmed to The News on Thursday that the government had made up its mind to abandon efforts for privatizing the Discos and handing them over to the provinces.

Instead, the government will strive for concessionary contracts probably with foreign and domestic investors, allowing them to run the power distribution companies on lease for a certain medium to long-term period.

The government had to change its mind owing to various reasons but the main reason was its inability to resolve land issues.

Although, the Centre floated the idea of provincialisation of Discos and Sindh probably showed some interest, nothing substantial could be achieved in the last

few years.

The sources said Discounted Cash Flow (DCF) method would be utilized for moving ahead for striking concessionary agreements with potential investors. It might be a form of public-private partnership (PPP) but its exact details will be worked out by the ministries of power and privatisation with consultation. The privatization of Discos was the brainchild of World Bank (WB) in the ‘90s under which Wapda was unbundled into Gencos and Discos with the ultimate objective to privatize both of them in order to bring efficiency in the power sector.

For two to three decades, the privatization of Discos was placed as part of the reform agenda to fix the cash-bleeding power sector but none of the governments could move ahead to achieve the desired objective.

Now the government has changed its course of action because of its inability to clean the slate of financial balance sheets, human resources, land cleaning, and above all the growing monster of circular debt, which accumulated manifold with every passing year in the last 16 years. The sources have quoted the study done by the WB’s IFC recommending the government to go ahead but its exact formation for moving ahead is not yet ascertained.

The minister for power and privatization was expected to sit together next week to work out modalities for moving ahead with concessionary agreements for all Discos.

The losses of Discos reached Rs520.3 billion in FY2021-22 and it might escalate further in the ongoing financial year, crossing the Rs600 billion mark.

The cash-bleeding power sector’s accumulated losses have crossed the defence spending of the country in the last two financial years, and there seems no sigh of relief for the masses without undertaking basic and fundamental reforms.