Wapda told to transfer properties to Discos in privatisation push

ISLAMABAD: The Power Division has asked the Water and Power Development Authority (Wapda) to transfer properties and shares of state-run power distribution companies (Discos) to their respective entities, aiming to avoid complications, like those experienced during the Pakistan Telecommunication Company Limited (PTCL) privatization.

Notably, Wapda will transfer the ownership of these properties and shares to the president of Pakistan and then to Discos, officials said. The move is part of efforts to fine-tune the privatization process, with Islamabad Electric Supply Company (Iesco), Faisalabad Electric Supply Company (Fesco), and Gujranwala Electric Power Company (Gepco) slated for privatization in the initial phase. These are the top-performing utilities of the total 10 supplying electricity to consumers under the government control.

The division has written to Wapda and provincial chief secretaries emphasizing that transferring ownership of properties and their shares to the respective Discos will streamline operations and make them more attractive to investors, avoiding issues seen in past privatization attempts, such as legal and procedural delays.

A financial advisor for the privatization process is expected to be appointed in two weeks to guide the government through this critical phase, Secretary Power Division Dr Fakhre Alam Irfan said while briefing the Senate Standing Committee on Power here Monday. The Senate Standing Committee on Power which met here with Senator Mohsin Aziz in the chair, reviewed critical reforms in Pakistan’s power sector, focusing on privatization, structural challenges, and market liberalization.

Senator Shibli Faraz raised concerns about the privatization strategy, questioning whether selling profitable companies first would deter investors from acquiring struggling Discos. He suggested bundling profitable and underperforming entities to ensure a balanced and viable privatization process. Provinces have shown reluctance to take over the DISCOs. Despite invitations to provincial governments, no responses have been received, Irfan revealed.

Secretary Power Division Irfan revealed that the government voluntarily withdrew the Integrated Generation Capacity Expansion Plan (IGCEP) 2024 in April last year. The plan was revised to prioritize only the least-cost projects. He explained that software is being used to evaluate which projects will incur the lowest costs to prevent passing on unnecessary charges to consumers. Currently, projects in the pipeline with a combined capacity of 7,000 to 7,500 MW are already committed, with additional capacity to be based solely on cost-effectiveness. The move is part of the government’s broader effort to mitigate the financial burden on consumers and ensure more efficient energy infrastructure development.

The government establishes a competitive electricity market, introducing the Competitive Trading Bilateral Contracts Market (CTBCM) this year. This initiative will enable multiple buyers and sellers to trade electricity contracts directly, reducing the Central Power Purchasing Agency’s (CPPA) role as a sole intermediary. Initially, the market will open in a limited, phased manner to test its viability. To support these reforms, the government has created the Independent System and Market Operator (ISMO), merging the market operation wing of CPPA and the system operator wing of the National Transmission and Dispatch Company (NTDC). This new entity will oversee market operations and regulatory functions.

A newly established Energy Infrastructure Development and Management Company will manage grid station assets, conduct feasibility studies, and engage with donors to streamline project execution. The appointment of its Board of Governors (BoG) is being appointed from the private sector. NTDC Chairman Fayaz Chaudhry has been assigned the responsibility of finalizing a restructuring plan, which is due for submission by March, according to the Secretary of the Power Division.

The Senate committee has also decided to invite the NTDC Chairman to the next meeting for a detailed briefing on the restructuring plan of the NTDC which aims to split it into smaller, more efficient units for better management. The secretary provided an update on cost-saving measures, highlighting the renegotiation and termination of contracts with Independent Power Producers (IPPs). Five IPPs have been shut down, yielding savings of Rs411 billion, while revised agreements with eight bagasse-based power plants have cut Rs238 billion by eliminating dollar-based contracts and delinking bagasse price from imported coal and fixing its price at Rs4500/ton.

Additionally, the cabinet approved the termination of agreements with 15 take-or-pay IPPs, resulting in total projected savings of Rs802 billion. Their return on equity has been reduced, and their dollar indexation has also been abolished and fixed the dollar rate for then at Rs168, these plants will now only receive payments for operational use, significantly reducing the financial burden.

Senator Shibli Faraz, however, criticized the high return on equity granted to IPPs, calling for stricter oversight. “Many plants are not operating at full capacity, yet the government continues to bear unnecessary costs,” he remarked. The committee raised concerns over governance issues, including delayed board appointments for Discos such as Hyderabad Electric Supply Company (Hesco) and Sukkur Electric Power Company (Sepco). Senator Aslam Abro criticized discrepancies in CEO age limits, urging immediate action to block decisions by current boards until new ones are in place. The secretary assured the committee that new boards with private-sector representation are being constituted. The tenures of these two companies’ boards expired months ago. We have asked them to not appoint the full-time CEOs and they have assured the power division.

All Discos have signed performance agreements, with Lahore Electric Supply Company (Lesco) aiming to reduce line losses to zero by 2027. The Power Division also shared progress on improving recovery rates, which have reached 96 per cent. Pension liabilities and 85,000 vacant positions within Discos remain significant challenges.

Senator Faraz emphasized the need for strategic planning, urging the establishment of a think tank to tackle systemic inefficiencies. He criticized the government for penalizing small-scale solar producers and questioned claims of offering the cheapest electricity in the region. “Exports cannot grow unless we bring electricity costs down,” he warned.

The meeting concluded with directives for the Power Division to provide detailed updates on agreements with IPPs and accelerate reforms. The committee also called for a review of CEO appointments and corruption allegations, demanding accountability within 15 days. These reforms, while ambitious, face hurdles such as resistance from provinces, governance challenges, and systemic inefficiencies. However, the government’s intent to exit the distribution business entirely signals a significant shift toward market-driven solutions in Pakistan’s energy sector.