Without finalising any recovery plan for over Rs 300 billion outstanding dues, but pressed by international financial institutions (IFIs) and pushed by the technocratic ministers, the Water and Power Ministry is set to dissolve the Pakistan Electric Power Company (PEPCO) on October 31.
An official source said the ministry had started work on the dissolution of PEPCO to meet one of the major demands of IFIs but the root cause of the problem, the nonpayment of dues by government departments, still remained unaddressed and matters would become worse as the new entity, Central Power Purchasing Agency (CPPA), takes over the job.
At a meeting held on Thursday, the PEPCO management expressed serious concerns over the dissolution plan without firming up a recovery plan for outstanding dues, without which the planned power sector restructuring could not work out in a sustainable manner. However, the ministry higher-ups said that they had to fulfil the commitment on dissolution by October 31.
The source said the names of board of directors of the CPPA had been sent to the prime minister for approval but the appointment of its chief executive would take weeks if not months. The new entity would start afresh the work of PEPCO and its major challenge would be to force the provincial governments to cough up outstanding dues of Rs 170 billion, which is what led to the demise of PEPCO, he said, adding that outstanding dues from the private sector amounted to over Rs 130 billion.
The ministry, he said, was even not clear how the new entity would manage the affairs, as almost all of the on-deputation staff of PEPCO would be reverted to their parent departments. The new people in top management positions would take months to understand the issues before finally attempting to address them.
Despite repeated requests that the outstanding power sector dues of the provincial governments should be deducted at the source, the government has not made any commitments to that effect. The power supply of government departments could not be cut off indefinitely as the political pressure at the local level forced the government to show some leniency.
The major worry for the ministry was the financial transactions of PEPCO, said the source. If the change of management was not implemented carefully, there could be a lot of mismanagement that would further increase the pressure, he said, adding that at least PEPCO’s dissolution would prove to be a soother at the upcoming talks with the International Monetary Fund.
He said transmission and distribution losses of distribution companies (DISCOs), which were allowed 16 percent losses per annum, were at over 19 percent, which incurred losses of Rs 24 billion per annum. The recovery of 88 percent by DISCOs was adding up another Rs 70 billion per annum in losses, he said.
