ISLAMABAD, Jan 6: The Water and Power Development Authority has failed to meet the deadline given by the president and the prime minister to complete the corporatization and restructuring process of Wapda by December 31, 2004, it is learnt.
The president and the prime minister had directed Wapda to shift the offices of Pakistan Electric Power Company (Pepco), an umbrella organization of 12 unbundled companies of Wapda, from Lahore to Islamabad to separate it from the administrative control of Wapda.
Informed sources told Dawn that no step could be taken so far to separate Pepco from Wapda or to shift Pepco offices to Islamabad. As such, Pepco continues to be under the administrative control of Wapda.
The ministry of water and power had recommended after interviewing four candidates the name of Mohammad Amjad for appointment as chief executive of Pepco but the Prime Minister Secretariat did not approve it because of delay in the shifting of Pepco offices to Islamabad, the sources said.
The other milestones, which the government has not been able to achieve as agreed with the World Bank, include the creation of a policy and implementation cell at the ministry of water and power and appointment of private sector chief executives for Discos and Gencos.
All movable assets of Jamshoro Power Company (JPC) and Faisalabad Electric Supply Company (Fesco) have been transferred in their names because the two entities are at the advanced stages of privatization.
In the case of Fesco, out of total 105 immovable assets, 77 have been transferred in the name of Wapda. The transfer of another 19 immovable assets is currently in progress.
However, Wapda has issued irrevocable power of attorney in Fesco's name and Fesco has taken physical possession and operation control of all the assets. The assets of JPC have so far not been transferred due to a dispute over the cost of land with the government of Sindh.
Similarly, the loan liability agreements for 12 corporate companies of Wapda, including Fesco and JPC, have been signed, while loan assumption agreements and subsidiary loan assumption agreements have also been inked between Wapda, Fesco and JPC and have been sent to the Privatization Commission for securing signatures of the lenders and the federal government through the economic affairs division.
The FRP submitted by the World Bank to the GoP says the power sector promises zero losses in three years through a combination of tariff increases for domestic consumers, better governance and sizable investment programme.
"Unless this plan is implemented through strong commitment, the government would have to meet cash needs of over Rs400 billion for Wapda alone in five years and much more if KESC privatization fails, and that there would be more shortages and outages by 2007," says the World Bank.
The "business as usual" in Wapda is estimated to cost Rs61 billion in operating losses, Rs67 billion in principal repayment of debt and Rs250-280 billion investment expenditure in five years.
The five-point recovery plan envisages cost reductions, better governance, planning and financing investments, and more importantly rationalising tariffs by increasing domestic tariffs and targeting the slab of first 150 units which get higher subsidy.
The FRP realises that inescapable reality for the survival of the power sector is that tariffs should cover the costs and the government should present a clear cut strategy for adjusting and realigning tariffs and targeting subsidies in pace with service improvements in 3-5 years.
The bank has offered to provide $500 million investment for turning around the sector in five years and to provide capacity-building support to key agencies and utilities to kick-start loss reduction.
It has also proposed an additional gas availability of 150mmcfd (million cubic feet per day) for power generation to save Rs5 billion per annum, collection of Rs30 billion uncollected bills and technical loss reduction which could ultimately bring down losses to zero and a saving of around Rs50 billion.
The plan also includes more powers to the corporate companies of Wapda with a clear mandate to focus on commercial performance and better consumer service independently and privatize Wapda units.
The World Bank proposes bringing in of commercial managers and directors, improving monitoring and evaluation and ensuring a proactive shareholder role for the ministry of finance.
The bank has also asked the government to take a high-level policy decision to pursue an active sector recovery plan and establish a strong leadership backed by its strong capacity to lead the reforms process and improve transmission and distribution, increase in hydel generation, rural electrification and support to privatization.