Published On: Tue, Dec 1st, 2015

Pakistan’s privatisation plan faces opposition

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By Tariq Ahmed Saeedi

KARACHI: Pakistan’s privatisation plan for its ailing power sector is likely to face a resistance from the country’s second largest province Sindh, which is ruled by socialist-progressive Pakistan Peoples Party.

The federal government has vowed to go for strategic sale or privatisation of the state-owned organisations, which include power distributors, Hyderabad and Sukkur electric power companies (Hesco and Sepco), and generation company Jamshoro located in the province.

Sindh Energy Secretary Agha Wasif Abbas told this scribe that the provincial government had expressed its intention to Islamabad that it wanted to take over the management of power distribution companies for the first five years.

“If we don’t succeed in bringing turnaround then a joint committee comprising provincial and federal governments’ representatives could be formed to decide the next move,” Abbas said.

Hesco and Sepco are two of the various federal government-run power distribution companies across the country whose assets sales are planned in 2016 and 2017.

The cash-strapped finance ministry committed with the International Monetary Fund (IMF) that it would get rid of the loss-making entities to improve its fiscal health.

In 2013, IMF loaned US$6.6 billion to Pakistan to help the country bolster its balance of payment position and against the loan the Washington-based lender wanted the country to take some fiscal measures. The IMF has given a number of waivers to Pakistan for its failure to attain some targets during different periodical reviews of the extended fund facility program.

Islamabad reiterated on several instances that privatisation and restructuring programs would “continue despite some setbacks.”

Barring a few transactions in banking and oil sectors, the federal government has, however, not made a noticeable mark on the privatisation front, especially when it comes to power sector.

It has yet to cut subsidies given to support loss-making power sector from the current 0.8 percent of the country’s gross domestic product.

Besides, its so-called circular debt has relapsed to more than six billion dollars – a fact that is widening its fiscal gap.

Alone Hesco and Sepco have accumulated more than US$600 million of receivables against different departments of Sindh government. Too, there’s discrepancy in this amount as the province admitted that it had to pay, but US$100 to 150 million to the federal government.

Dr Ashfaque Hasan Khan, former economic advisor of the finance ministry, believed that as long as line losses are not curtailed the issue would never be resolved.

Private power producers are adding around 6,000 megawatts to the national grid.

“And, for every 1,000 megawatts the recovery is for 600MW,” Khan said. “Obviously, someone must bear up the burden of unpaid bills.”

He didn’t favour transfer of power companies’ management to Sindh from Islamabad.

Energy experts said privatisation is the only solution to the energy crisis. They said private management doesn’t hesitate to take unpopular decision for recovery of payments from consumers.

The only privatised integrated power company K-Electric is the most-quoted example. However, despite its relatively good performance, the power utility is causing anger among its consumers who often complain of excessive billings.

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Shahid Tariq

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