service. At the same time, KE owes NTDC payment for the 600MW that it receives from the grid, and owes Sui Southern Gas Company and Pakistan State Oil for fuel supply.

**Table 14: Utility management index of utilities in Pakistan and comparators, 2015**<sup>**41**</sup>

||Odisha,|India|AP,I|ndia|Raj,|India|Pak|istan|International<br>|
|---|---|---|---|---|---|---|---|---|---|
||WESCO|CESU|APSPDCL|APEPDCL|JVVNL|JDDVNL|LESCO|KE|benchmark|
|**Utility Management**|**50%**|**40%**|**56%**|**56%**|**60%**|**60%**|**48%**|**86%**|**64%**|
|_Financial Discipline_|_43%_|_36%_|_53%_|_53%_|_64%_|_64%_|_50%_|_79%_|59%|
|_Human Resource_|_70%_|_40%_|_43%_|_43%_|_36%_|_36%_|_43%_|_86%_|62%|
|_Information and Technology_|_36%_|_43%_|_73%_|_73%_|_80%_|_79%_|_50%_|_93%_|71%|

_Note: Scores based on index developed for the Rethinking Power Sector Reform Project. For more details go to project website at http://www.esmap.org/rethinking_power_sector_reform._ The performance of the two utilities with respect to **Human Resources** (HR) is along similar linesLESCO struggles to meet average scores while KE scores much above those. Notably it is able to pay bonuses to reward good performance. However, even at KE managers cannot hire or fire staff without higher level approval (see annex).

For LESCO decisions concerning middle management and above are taken by PEPCO, as well as decisions pertaining to all staff hired prior to WAPDA unbundling. Poor scores on management autonomy and performance review of employees contribute to an overall performance score of 43 percent for HR practices. The difference between KE and LESCO is important since it relates to the abilities of the two utilities to respond to poor performance and the need for change. After the 2013 decision to start the privatization of LESCO, new senior management were appointed on competitive private sector pay-scales.

KE scores highly (89 percent) on **Information and Technology (IT)** , well above the average, using the latest energy management, customer care, and corporate care IT solutions. LESCO scores well below average and importantly does not have a SCADA system or a call center to manage customer complaints (see annex).

Putting together the evidence from these various indicators shows that LESCO’s corporate governance environment falls short in many ways relative to that enjoyed by KE. Comparisons with the Indian state-owned utilities are also mixed. Much of the poor institutional performance is linked to the way in which LESCO (and the other DISCOs in Pakistan) are managed by the state— big decisions on finance, employment and pricing are all taken out of the DISCOs’ hands and instead are taken at a higher level. The incentives for management to improve performance are weak. Management is restricted in what it is allowed to do, and there is no corporate penalty for poor performance because of the way in which circular debt has been underwritten by the government’s actions.

Governance indicators for the private utility KE look to be considerably stronger than those for LESCO across all aspects considered, indicating a higher degree of managerial autonomy in this

> 41 For the detailed utility management index, see the annex.

40