ISLAMABAD: A performance audit of the Board of Directors (BoD) of Faisalabad Electric Supply Company (FESCO) has uncovered serious governance shortcomings, operational inefficiencies and financial mismanagement during FY2021-22 and FY2022-23, highlighting the utility’s failure to achieve key performance targets set by the Ministry of Energy (Power Division).
The audit report concluded that FESCO’s weak governance, lack of strategic oversight and ineffective performance monitoring contributed to financial losses amounting to Rs16.968 billion over the two-year period, raising concerns about the company’s long-term financial sustainability.
According to the findings, FESCO failed to meet several operational and financial benchmarks, including targets related to recovery, transmission loss reduction, infrastructure development, metering and consumer services. The shortfalls not only weakened the company’s financial position but also added to the country’s growing circular debt.
One of the most significant observations was the company’s Aggregate Technical and Commercial (AT&C) losses, which reached 10.26%, exceeding the approved target of 8.84% by 1.42 percentage points. The excess losses translated into 211.694 million additional electricity units, valued at approximately Rs6.298 billion, beyond the limits allowed by the National Electric Power Regulatory Authority (NEPRA).
The audit also highlighted deficiencies in Mobile Meter Reading (MMR) performance, with meter-reading accuracy falling short of targets by 1% for general consumers, 11% for industrial consumers and 17% for tube-well consumers.
Infrastructure development also remained below expectations. Under the 8th System Transmission and Grid (STG) Programme, FESCO completed only 337 kilometres of transmission lines against the annual target of 530 kilometres.
Meter replacement targets witnessed one of the largest performance gaps. Against a target of replacing 1.152 million non-static meters, the company managed to replace only 18,832 meters, leaving a shortfall of more than 1.13 million meters. Likewise, only 6,558 Automatic Meter Reading (AMR) meters were installed against a requirement of 16,066, leaving 9,508 installations pending.
The company also failed to meet its target for providing new industrial electricity connections, energising only 804 industrial consumers against a target of 1,516.
Financially, the audit painted a troubling picture. FESCO’s accumulated losses increased from Rs77.475 billion in June 2022 to Rs96.763 billion by June 2023, while the company’s equity position deteriorated from a positive Rs3.713 billion to a negative Rs9.201 billion following a net loss of Rs14.983 billion during the year.
The report attributed the financial deterioration to rapidly rising operating costs. Operation and Maintenance (O&M) expenses nearly doubled, increasing by 93% from Rs20.239 billion in FY2017-18 to Rs38.989 billion in FY2022-23, while other operating expenses surged by an alarming 473% during the same period.
The auditors further criticized the Board of Directors for failing to establish Key Performance Indicators (KPIs) for management and for not developing a monitoring and evaluation framework within the timeframe required under its performance agreement with the Power Division. The absence of these governance mechanisms, the report noted, significantly weakened accountability and oversight.
The audit also identified procedural irregularities in corporate governance, revealing that eight key sub-committees, including the Audit & Finance Committee, Human Resources & Legal Committee, and Technical Committee, were constituted without formal approval from the Board, undermining institutional governance and transparent decision-making.
In addition, the company failed to implement several critical initiatives, including Automated Metering Infrastructure (AMI), timely replacement of obsolete meters, feeder bifurcation programmes, and Health, Safety and Environment (HSE) policies. According to the audit, these shortcomings adversely affected operational efficiency and contributed to increased safety risks, including both fatal and non-fatal incidents.
The audit concluded that the Board’s inadequate oversight and weak governance practices significantly affected FESCO’s operational and financial performance, resulting in mounting losses and failure to achieve agreed performance benchmarks.
Responding to the audit observations, FESCO management attributed its inability to achieve certain targets to unavoidable circumstances and external factors beyond its control. However, the auditors rejected the explanation, maintaining that the Board of Directors remains ultimately responsible for ensuring effective implementation of strategic plans, strengthening governance and delivering agreed performance objectives.
Story by Mushtaq Ghumman
