Delay in Pepco dissolution: ADB and World Bank express serious concern

The Asian Development Bank (ADB) and World Bank (WB) have expressed serious concern over delay in dissolving Pakistan Electric Power Company (Pepco) well past the government deadline of October 31, 2010, and urged the government to wind it up immediately and grant full autonomy to the power distribution companies (discos).
Energy experts had termed the target date for winding up Pepco as unrealistic, given the lingering power crisis in the country, including the circular debt. Power Holding (Private) Limited has assumed around Rs 301 billion bank loans against electric companies between 2003 and 2009. Pepco is to receive over Rs 210 billion from federal and provincial governments and private consumers. Pakistan State Oil (PSO) receivables have also swelled to alarming level due to non-payment of dues by power sector. The circular debt is also causing problems for te Oil and Gas Development Company (OGDC), which is to receive around Rs 125 billion from oil refineries and gas distribution companies. The Deputy Chairman of Planning Commission, Dr Nadeem-ul Haq, who heads the team on power sector reforms, said: "We are moving ahead with dissolving Pepco, and the process will be completed by July or August, 2011."
In August 2010, the Cabinet Committee on Restructuring (CCoR) had decided to wind up Pepco by October 31, 2010 - an action supported by ADB and World Bank. At present, Pepco plays the role of an oversight body in the power sector.
According to documents available with Business Recorder, the CCoR had decided to grant autonomy to the discos, the power generation companies (gencos) and National Transmission Distribution Company (NTDC) through reconstituting independent and professional boards of directors by September 30, 2010. However, the government delayed the restructuring process of the boards and notified reconstitution of the boards of eight power distribution companies on February 8, 2011. The CCoR had also set the deadline of October 31, 2010 to change all Chief Executive Officers (CEOs) of power distribution companies, gencos and NTDC. But the government decided not to change the CEOs of the discos and gencos. Sources said that the new BoDs of power distribution companies had been authorised to take decision either to change or retain existing CEOs. "New boards of directors of discos have held their first meeting and decided to retain the existing CEOs," sources said. Policy reforms, supported by multilaterals, include eliminating circular debt, reduction in line losses of power distribution companies, improved financial position, zero budget support for power sector, and ensure discos finance 20 percent of their investment through internal cash generation.