DISCOs to be offered to private sector through long-term concessions

October 09, 2023 (MLN): The confusion regarding the final decision for Distribution Companies (DISCOs) has persisted in the country for the past two years due to different decisions made by the cabinet, however, it has now been decided to offer all the companies to the private sector through long-term concessions, Muhammad Ali, the Caretaker Minister for Energy, Power & Petroleum said during an interview.

The cabinet made different decisions at different times, including options such as devolution to provinces, privatization, and long-term concessions, which resulted in a lack of clear track regarding DISCOs.

The minister said that the idea of DISCOs to provinces was dismissed as they lack the capacity to share losses, leading to a mere transfer from one government entity to another. 

He highlighted that the problem with DISCOs lies in their management and governance, which can only be resolved by the private sector.

However, the government has not moved towards privatization due to past issues, such as the problematic privatization of PTC where land ownership complications arose. 

Therefore, it was decided to offer all DISCOs to the private sector through long-term concessions, granting them management rights while the government retains 100% ownership of the entities.

The minister affirmed that this is the final decision, and collaboration with the World Bank and SIFC has already commenced. 

The objective of attaining rewards by meeting the Key Performance Indicators (KPIs) will drive the sector to work more efficiently and ensure proper management.

While addressing the model of long-term concessions, the minister cited the example of Islamabad Airport, which has been successfully operated under such an arrangement.

Addressing concerns about the time-consuming nature of the process, the caretaker minister assured that significant steps are being taken to fast-track the process. The Ministry of Energy and Power will work on this model collaboratively.

This opportunity for long-term concessions is open to both local and multinational firms. 

Muhammad Ali further highlighted the benefits of the arrangement stating that the uniform tariff regime may also come to an end, as charges will be based on collection and performance according to the tariff rate in each area.
While gas supply is limited globally, the ministry has secured deals for two LNG cargos for December delivery. 

“Despite this significant development, load shedding will still occur. However, efforts are being made to ensure that the two terminals operate at full capacity to supply industries, thereby boosting exports,” he added.

Regarding the circular debt in the gas sector, the minister disclosed that efforts are underway to reduce the late payments, as failure to resolve this issue would result in an additional loss of Rs400 billion, potentially leading to an increase in gas prices. 

Additionally, steps are being taken to rationalize gas prices in the south and north, where disparities currently exist.

Addressing electricity-related issues, the minister emphasized the need for serious action against electricity theft. 

Administrative measures are being taken, and a dedicated board will be established to ensure transparency and recover losses. 

The minister concluded by stating that a stringent roadmap has been developed for the privatization of entities like PIA and the steel mill, which will be implemented soon.

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