International Finance Corporation Suggests Private Sector Participation in DISCOs Management

International Finance Corporation (IFC), a member of the World Bank Group (WBG), has proposed private participation in the management of ex-WAPDA Distribution Companies (DISCOs) to improve their performance.

Business Recorder, while quoting its sources, has said that IFC has suggested that this proposal should be initially implemented in two DISCOs.

In this regard, IFC shared the public-private partnership (PPP) models of several countries, including Liberia, Brazil, Peru, and Kosovo as well as the Turkish model of transfer or ownership backed by the sale of shares.

Earlier, the Privatization Commission (PC) had requested the IFC to develop a competitive outlook for the private sector’s participation in DISCOs. However, after the negotiation on the Financial Services Advisory Agreement (FASA) between PC and IFC, it was decided to transfer DISCOs to provinces, consequently stalling IFC engagement.

Issues with DISCOs

IFC highlighted that DISCOs possess the following problems.

1. High losses in transmission and distribution, with the actual loss being Rs. 119 billion more than the targeted loss.
2. Lower bill recovery, causing a loss of Rs. 230 billion.
3. Pending applications for electricity connections, as evident from the fact that the installation of 176,829 connections with a total load of 1,215 MW is currently pending.
4. Network overloading, with 19 percent of 11 kV feeders and 5 percent of distribution transformers being overloaded
5. Total receivables of DISCOs standing at a colossal Rs. 1.7 trillion

IFC also highlighted the importance of assessing the existing assets of the DISCOs and their conditions, stating that the right to use these assets could be transferred to the private parties even though the ownership of DISCOs remains with the government.