Privatisation of power sector entities: Essential Services Act enforced to bar employees from protests

ISLAMABAD: The government has enforced the Essential Services Act for the employees of all Pakistan power sector entities, including distribution companies’ (Discos), generation companies (Gencos) and National Transmission and Dispatch Company (NTDC), for 6 months from July 27, 2024, says a notification issued on September 12, 2024 by the Interior Ministry.

“This action has been taken to ensure uninterrupted operations of the entities. The incumbent regime, which is vigorously working for privatisation of the Discos, enforced the Act to prevent the protests feared to be launched by employees of the said entities and to enable itself to take lawful action against the protesting employees,” a senior official of the Power Division told The News.

As per the notification, in exercise of the powers conferred by sub-section (1) of section 3 of the Pakistan Essential Services Maintenance) Act, 1952 (LIII of 1952), the federal government is pleased to declare all Pakistan power sector entities including Discos, Gencos and NTDC as essential services for a period of 6 months with effect from July 27, 2024. The notification also says that if further extension is required in application of the said Act, a reference should reach the Ministry of Interior at least two months in advance of the expiry of the current period.

The privatisation plans include the electricity distribution companies in Islamabad (Iesco), Gujranwala (Gepco), Faisalabad (Fesco), Lahore (Lesco), and Multan (Mepco).

The privatisation of the said power distribution companies is set to begin by April 2025. This initiative aims to enhance operational efficiency, cut financial losses and attract private investment into the energy sector.

The first round of privatisation of power distribution companies will begin with issuing calls for expressions of interest in that month, with final transactions anticipated to be concluded within three to six months.

Pakistan faces a multitude of energy-related challenges, including frequent power outages, significant transmission losses, reliance on imported fuels, limited share of renewable energy sources, and a substantial circular debt — a cycle of unpaid government subsidies that accumulates as debt for distribution companies.

In response, the current administration is focusing on modernising the electrical grid and pursuing privatisation of the distribution sector as a part of broader efforts to resolve these issues.

Privatising loss-making state-owned enterprises (SOEs) has been a long-standing recommendation from the International Monetary Fund (IMF). With Pakistan grappling with a severe fiscal deficit and a substantial external financing gap, a $7 billion bailout deal was reached with the IMF in July, though it still requires approval from the lender’s executive board.