DISCOs need independent boards with zero influence from bureaucracy: PIDE

ISLAMABAD    -   Pakistan Institute of Develop­ment Economics (PIDE) has said that power distribution compa­nies (DISCOs) are corporatized but only on paper and remarked that over the years, the govern­ment’s footprint on the sector has become more significant instead of decentralizing power.

To bring efficiency in the per­formance of DISCOs, these com­panies need independent boards with zero influence from bureau­cracy, Pakistan Institute of Devel­opment Economics (PIDE) has said here Sunday.

According to PIDE report, the cir­cular debt first broke out in 2006. Since then, this is the third IMF program focusing on a deteriorat­ing circular debt with little impact. We always emphasize increasing prices and passing on the burden to consumers without worrying about structural losses. PIDE notes that tariff increases without struc­tural changes can increase ineffi­ciencies and sector losses. Consum­er-end tariffs are highly sensitive to the losses in the transmission and distribution systems and bill recov­eries. Per unit increase in price by Rs1 adds to an additional loss of more than Rs10 billion.

It further said that only increas­ing tariffs has not resolved circu­lar debt or power sector ineffi­ciencies. The power sector needs serious decentralization of de­cision-making and management overhaul. Technical issues, such as line losses and bill collection, need to be resolved locally by the local management.

The PIDE suggested that unless all companies are made respon­sible and accountable for all their decisions and finances, it would not be possible to bring efficiency to the power sector.

The billing system has to be de­centralized and carefully targeted with technology-based pre-paid smart meters. Pre-paid smart me­ters will also bring transparency to billing, effective demand man­agement, and commercial efficien­cy to distribution companies.

Furthermore, social protection has become a political instru­ment. The expenditures on social protection observe an increasing trend and stand at around Rs316 billion in the review report. While well-meaning, the programme is seeking further expansion along with indexation, the report said.

The PIDE estimates of poverty also suggest that poverty rate in Pakistan is around 21.5 percent. We note that BISP already cov­ers people far more than the ul­tra-poor. Still, social protection is an expanding agenda in Pakistan, and the provinces also have so­cial protection policies. Social pro­tection is being done through util­ity stores, the provision of health cards, the National Rural Support Programme (NRSP), the Pakistan Poverty Alleviation Fund (PPAF), micro-finance networks, fuel sub­sidies, public sector education provision, and a state-owned pen­sion scheme.

Perhaps there is a need to un­dertake a critical review of this whole system and seek consoli­dation and productivity gains. In addition, these schemes have no concept of graduation or mobil­ity. Conceivably this is indicative of the economic pessimism in the country. PIDE noted that the over­lapping expenditures for social protection under different public schemes are not considered

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