Privatisation of power sector

Power sector reforms-privatisation and trade unions

According to the news story appeared in the leading English daily The News international-the government is considering the proposal of Nepra to ban the trade union activities in power sector. No formal decision has been made so far.

The proposal of Nepra chief Farooq Tauseef to ban the trade unions in power sector has raised questions regarding the real motive of this proposal. The Nepra chief put forward this proposal in a high level meeting chaired by the Prime Minister Imran Khan to review the reforms in power sector.

Nepra chief also proposed major restructuring of the power sector. The Prime Minister Imran Khan wants to reform the power sector. He formed the committee on energy reforms soon after taking power in August 2018.

Now the Nepra chief has proposed something concrete. He said billing and recovery of power bills should be privatised and all loss-making power production units should be privatised as soon as possible. His proposals meant to give bigger role in the power sector.  

Even though, ban on a trade union is clearly a violation of Article 17 of 1973 constitution which provides for a fundamental right to exercise the freedom of association and the right to form unions. The government cannot impose restrictions or ban a trade union without having a solid reason and ground for it. There is no such situation in power sector.

The main reason of this proposal seems to be to end the organised resistance offered by trade union against the proposed privatisation of power distribution companies. The PML-N government postponed the privatisation of Lesco and Iesco after the country wide protests from trade union and workers.

All Pakistan WAPDA Hydro Electric Workers Union (CBA) is the largest and most powerful trade union in Pakistan. This is the only union in Pakistan which has union owned offices and assets. So the proposal of imposing the ban on trade unions in power sector is well thought out.

The union has the capacity to mobilise thousands of its members throughout the country. The government aim is seems to weaken the union and resistance it poses against privatisation.   

In 1997- Then Prime Minister Nawaz Sharif did imposed the ban on trade union activities and handed over the WAPDA to army. Thousands of military personals were deployed to reduce the corruption and line losses and to improve the services.

But nothing really improved on the ground. The trade union ban was remained in place for few years. The ban did not help to improve the services and systems in WAPDA and distribution companies.   

Both the IMF and World Bank have been pushing the successive governments since 1990s to undertake the privatisation of power sector. The distribution and generation companies were established to start this process.

Karachi electric Supply Corporation (KESC) was privatised during Musharaf period. KESC was established to supply power to Karachi. KESC is still facing the same problems even after 15 years of privatisation.

The promised investment to improve the distribution system and to increase the generation capacity was never been made. KESC has become a story of failed privatisation. If the privatisation was meant to improve services and modernize the system- then it never happened in Karachi.     

The government wants to break the power of organised workers to impose ban on trade union activities. The history shows that WAPDA Union and workers always resisted the privatisation. The Union leadership and activists rightly feared that privatisation will mean job losses and expensive services.

  

 PTI government wants to privatisation 1223 MW Balloki Power Plant, 1230 MW Haveli Bahadur Power Plant, Guddu Power Plant (747 MW) - Central Power Generation Company Ltd – CPGCL (GENCO – II), Nandipur Power Plant (425 MW) – Northern Power Generation Company Ltd – NPGCL (GENCO – III), Islamabad Electric Supply Company (Iesco) and Lahore Electric Supply Company (Lesco) and Faisalabad electricity Supply Company (Fesco).

The PTI government wants to raise Rs 300 billion through privatisation. The PTI government wants to plug some gap in the tax collection through the privatisation of state enterprises. The major chunk of Rs 300 billion will come from power sector companies.

The neoliberal economic theory believed in ―free market economy‖ and voiced for free individual choice with minimum state intervention. The theory called for deregulation of businesses and privatisation of publicly owned assets thus minimising the role of a welfare state.

Pakistan has been under pressure from IMF and World Bank to privatise the power sector and minimize the state intervention in the running and regulating this sector. The main reasons told to privatise the power sector being the burden of price subsidies, low service quality, inadequate revenue collection, high network losses, and poor customer service.

Furthermore, international imperialist financial institutions have been used by the international capitalist ruling class to influence the third world countries, directly or indirectly via donor agencies to adopt the neoliberal policies.

WAPDA was created in 1958 as a semi autonomous statutory body to regulate the power and hydel development in the country. Its main purpose was to look after, expand, and channelise the power sector. In 1992, this arrangement was reconsidered due to the economic burden, inefficiency of WAPDA, customer dissatisfaction, problems with financiers.

The government decided to corporatise the power wing of WAPDA, the plan involved un-bundling the power sector in to several power generation, transmission, and distribution companies and eventually privatise them.

 In addition an independent institution, a regulatory authority, National Electric Power Regulatory Authority (NEPRA) with the major task to regulate the sector was created in 1997 and Pakistan Electric Power Supply Company (PEPCO) was also established to oversee the corporatisation and privatisation of power sector in 1998.

The involvement of foreign donors evoked a lot of resistance from within the system. There were people within the system who looked at the idea of corporatising WAPDA as a foreign idea and thought that Pakistan was pressurised into taking this decision by the imperialist institutions.

 Pakistan wasn't prepared to handle the process of corporatisation and there were no solid grounds prepared for corporatisation. Within WAPDA there are people who still consider WAPDA the ultimate organisation that has the potential to run the energy sector smoothly.

Privatisation and trade union ban is not the solution to the problems of power sector. The government should invest more in this sector to improve the system and services. The trade union can help to improve the services.

When the KESC – now K-Electric – was privatised in 2005, we were told that privatising it would transform the ailing company and would bring new investment that would improve the distribution system and control line losses. The new investment would help install more power plants which would produce more electricity to meet the increased demand. 

The residents of Karachi were expecting better services and uninterrupted power supply after the privatisation. They hoped that the company would become more efficient and capable of handling any crisis-like situation.

But the city’s residents are facing the same old problem even after 15 years of the power utility’s privatisation. Every crisis has revealed that this method of providing power is ill-prepared, incapable, and inefficient. The people of Karachi still spend hours without electricity in extremely hot weather. The system is still inadequate and cannot cope with the rising demand and load. The wide gap between the production and demand of electricity still exist and the national grid is plugging this gap.

K-Electric has become a classic example of failed privatisation over the years. There is a general consensus among political parties that KE’s private management seems unable to improve its performance and put an end to daily power outages in the city.

We can learn from the failed privatisation of KESC. A World Bank (WB) study in 2019 has revealed that the privatisation of Karachi Electric Supply Corporation (KESC) has not yielded the results that were the rationale for the strategic sale of the entity.

                                                                                         Khalid Bhatti