May 19, 2002	Sunday	Rabi-ul-Awwal 6, 1423

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LAHORE, May 18: The World Bank is ‘very disappointed’ by the limited progress achieved in the power sector reform programme, including the corporatization of Wapda, John W Wall, the WB country director, has stated in a confidential letter to federal finance secretary Mueen Afzal.

The letter followed a video-conference held in mid-March.

The letter included a list of, what it called, “key actions and immediate steps” required to be taken in the power sector for the proposed Second Structural Adjustment Credit.

The letter asked for immediate transfer of assets and liabilities, as well as other rights and obligations; definition of principles and modalities for transfer of assets from Wapda’s power wing, transfer pricing and handling of cross subsidies to protect weaker Discos based on financial modelling exercise and decision taken by the policy committee of Feb 19, 2000.

It said a supplementary business transfer agreement for final allocation of assets and liabilities needed to be drafted and submitted to lenders for approval. It also asked for notification of provincial tax exemption for transfer of assets.

It also asked for issuance of transition agreements for staff leading to conclusion of employment contracts with corporatized entities no later than Dec 31, 2002, and directives to ensure authority of relevant boards of directors.

The letter also called for early issuance of licences to all distribution and generation companies and the National Transmission and Distribution Company by the National Electric Power Regulatory Authority.

The government was asked to issue policy guidelines on market structure, transition agreements and introduction of competition. The letter said it must also create technical working groups for operating and commercial procedures and detailed market design.

The World Bank asked the Wapda’s power wing to take all necessary measures including, but not limited to, reduction of system losses, other efficiency improvements and retail tariff adjustments notified by the government.

The World Bank also listed intermediate steps for improvement of the Wapda’s fiscal health and asked the government to take decisions on settlement of remaining arrears of the Karachi Electric Supply Company and the Federally Administered Tribal Areas and implement them. The Wapda and distribution companies must ensure that current bills were being paid on time.

The letter finally asked the Wapda and corporatized entities to complete and update tariff schedules, taking into account medium-term outlook and targets for financial viability and indicate desired and proposed changes in tariff level and structure.