A TOP official of the Privatisation Commission has informed a parliamentary panel that the government plans to divest between 51pc and 100pc of the assets of at least three of the 10 Discos in the current fiscal. However, given the dismal investment climate and concerns over a potential political and labour backlash, the task appears formidable. In addition, the Discos face serious structural and financial constraints, including problems with asset transfers, grid station ownership and recovery of dues from public sector entities. These matters, related to regulatory uncertainty, liabilities owed to government bodies and mounting pension obligations, have made the situation more difficult for the privatisation authorities. The power sector has long witnessed inefficiencies, technical and commercial losses, electricity theft, corruption, poor governance, etc. According to the finance ministry’s Central Monitoring Unit, the sector accounts for Rs2.4tr of the Rs4.9tr circular debt owed by SOEs, making it the biggest threat to fiscal sustainability. Its report, released earlier this month, notes that Discos “reflect unsustainable losses when stripped of subsidies, further compounded by outdated infrastructure and unaccounted for energy losses”. It added that persistent government financial support through grants, subsidies and equity injections continues to weigh heavily on public finances. Without sweeping reforms, including governance restructuring, technology upgrades, privatisation or concession models and tariff realignment, the report warned, the fiscal burden would persist, stalling the energy sector’s recovery.

It comes as no surprise then that multilateral creditors such as the World Bank and IMF have been pressurising the government to privatise these entities, starting with Islamabad, Gujranwala and Faisalabad, which are in relatively better financial shape. Yet, privatisation is no silver bullet for the ills plaguing these firms. The experience of K-Electric, the only privatised Disco, shows that despite significant reduction in losses, reduced blackouts in Karachi and infrastructure upgrades over the last two decades, the company is still struggling due to hurdles stemming largely from a weak regulatory framework and poor official policies governing the power distribution business. Therefore, the broader structural issues undermining these firms must be addressed and a competitive electricity market established before meaningful progress can be made on the privatisation of Discos and improvement of their service delivery. Or consumers will continue to suffer despite privatisation.

Published in Dawn, July 24th, 2025