WEB DESK: The chairman Privatisation Commission, Mohammad Zubair, while talking to media persons at the Federation House Karachi, has revealed that Expression of Interest (EoI) for the sale of Faisalabad Electric Supply Corporation (Fesco) is to be received by 31st December.
He added that this was subsequent to successful road shows in October – an outcome of the government’s hectic efforts for timely privatisation of state-owned power sector companies.
Notable economists, including former finance ministers Dr Hafiz Pasha as well as Dr Salman Shah have opposed the move to privatise power sector entities on several grounds. First and foremost, they have pointed out that the power sector needs urgent reforms that have already been agreed with the International Monetary Fund (IMF) under the 6.64 billion dollar Extended Fund Facility.
However, their implementation remains stalled for reasons ranging from failure to usher in governance reforms leading to sustained high transmission and distribution losses to failure to empower the regulator National Electric Power Regulatory Authority (Nepra) to take decisions efficiently and effectively and failure to contain the circular debt despite repeated attempts. In short, the right time to privatise would be subsequent to the implementation of reforms that have already been identified and agreed and not before the reforms have been implemented.
Secondly, economists caution the PML-N administration in its single-minded indefatigable support for privatisation as a means to not only end the large annual bailout packages to inefficiently-run state-owned power companies but also as a means to improve performance of the entities which would benefit the consumers by pointing to the case of K-Electric.
It needs highlighting that subsequent to the privatisation K-Electric failed to operate at capacity or enhance its generation capacity. The utility instead accessed cheaper electricity from the national grid during the tenure of the PPP-led coalition government under an agreement.
Thirdly, Fesco is a profit-making unit and not a loss-making one. In other words, it may have been appropriate to sequence the privatisation of power units by first selling off loss-making units. In addition, in case there are properties/assets owned by Fesco but not in its possession these must not be sold to the private sector like in the case of PTCL privatisation or else partial payment by the private investors may be withheld.
And finally, as is the norm, the existing staff of Fesco has already expressed its opposition to the sale and the Minister for Water and Power has reportedly begun talks with the employees with the objective of easing their concerns. Be that as it may, a golden handshake would no doubt be costly and in the event that the government insists that the new owners do not fire surplus staff, then it would be tying the hands of the private management in its drive to enhance productivity.
Zubair, while addressing the Federation of Pakistan Chambers of Commerce and Industry also stated that Pakistan Steel Mills and Pakistan International Airlines, high loss-making units, would be privatised by 2018 though he did not clarify whether this would be prior to or subsequent to the general elections scheduled for that year.
This is indeed unfortunate as it implies continuation of bailout packages to these entities, and with respect to PSM that is all but shut down, periodic releases for salaries of the heavily overstaffed entity. Ideally and as per the manifesto of the PML-N, the government would restructure loss-making units with a view to privatising them at a later stage and desist from sale of those units that are profit-making given the global as well as the national economic climate today.