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ISLAMABAD: The federal government has finalised its plan to hand over 10 power Distribution Companies (Discos) to the private sector with a view to reducing financial burden on the national exchequer, well-informed sources told Business Recorder.

According to the plan, five Punjab-based financially sound Discos, i.e., Islamabad Electric Supply Company (Iesco), Gujranwala Electric Power Company (Gepco), Lahore Electric Supply Company (Lesco), Faisalabad Electric Supply Company (Fesco) and Multan Electric Power Company (Mepco) will be given to the private sector under 10-year Concession Agreements (CAs).

Under the concession agreement, the party/parties that acquire the company for 10 years, will have to invest from its/their own resources to improve the distribution and transmission infrastructure. "The new investor will invest in transformers, ABC bundle cable and other related equipment aimed at improving the performance of the company and reduce losses. The investor will get return on its investment,” the sources continued.

The other five loss-making and financially weak Discos like Hyderabad Electric Supply Company (Hesco) Sukkar Electric Power Company (Sepco), Quetta Electric Supply Company (Qesco), Peshawar Electric Supply Company (Pesco) and Tribal Electric Supply Company (Tesco) will be given to the investors on the basis of management contracts for five years.

Under the management contracts, the government will invest in the five financially weak companies to improve their infrastructure, reduce losses and improve recovery. The management investor will get its share in savings to be achieved through reduction in losses and improvement in recovery.

The sources said though Sindh-based Discos will be given to the private sector, a reasonable share will also be given to the Sindh government so that all the decisions are taken with its consent.

The issue of Hesco and Sepco came under a detailed discussion at the meeting of Cabinet Committee on Energy (CCoE) on Thursday wherein it was decided to offer both the companies to Sindh government under public-private partnership.

"We have discussed a proposal that both the Discos should be offered to the provincial government through management contract to the private sector on sharing basis," said an official.

According to the sharing formula, losses, subsidies and investment for the next five years will be equally shared by the Federal and Provincial Government for five years. However, after five years it will be the sole responsibility of provincial government to manage the affairs of the companies.

The cumulative financial volume of losses and subsidy of both the companies is Rs 100 billion per annum, which will be equally spent by federal and provincial governments in the next five years.

However, the contract will be in the hands of private sector not the provincial government, the sources maintained.

CCoE will write to CCoP that a ‘provincial angle’ should also be incorporated in the formula of Concession Agreement and Management Contract.

Copyright Business Recorder, 2021

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