Rs 300 billion sell-off proceeds unlikely to be realized

Federal government may not be able to achieve revised Rs 300 billion from privatization proceeds in the current fiscal year (2019-20) due to legal and administrative challenges and consequently the primary and fiscal deficit benchmarks agreed with the International Monetary Fund (IMF) may be compromised.

Sources said that there would be an increase of 0.7 percent in the budget deficit if projected Rs 300 billion on account of privatization proceeds are not realized in the current fiscal year.

An official said that privatization of two RLNG power plants-Haveli Bahadur Shah and Balloki power plants-under the existing legal structure may not be possible by the third quarter of the current fiscal year as it is binding on the two power plants to utilize 66 percent of LNG imported from Qatar on an annual basis which is relatively more expensive than other sources particularly spot purchases.

The federal government has been exploring various options to remove this condition but to no avail. The matter is with the Economic Coordination Committee (ECC) of the Cabinet for final decision.

Privatization of Discos is a herculean task given the administrative challenges - weak writ of the government, large territorial jurisdictions, national uniform tariff system as well as fear of litigation and protests by employees against privatization.

The privatization of two Gencos - Guddu Power Plant and Nandipur Power Plant- are facing issues relating to tariff adjustment. The National Accountability Bureau (NAB) is also probing alleged corruption in Nandipur Power Plant.

The two Gencos are facing a combined loss of Rs 11 billion in current fiscal year after earning a profit of Rs 4 billion in 2018-19. Their electricity tariff on account of fuel adjustment is pending with the National Electric Power Regulatory Authority (Nepra). Four corruption related inquiries are pending against Nandipur Power Plant.

The government approved the privatization of the two Gencos in August 8, 2019 during the Cabinet Committee on Privatization but so far there has been no progress though officials are optimistic that at least one of the two Gencos would be privatized during the first half of 2020-21.