Pakistan Energy Minister Sardar Awais Ahmad Leghari has announced that the privatization of public sector power distribution companies (discos) would start by April 2025, state-run media reported on Thursday, with the aim to improve efficiency, reduce financial losses and attract private investment in the energy sector.
Pakistan’s power distribution sector is managed by 10 distribution companies responsible for supplying electricity to consumers. Pakistan faces significant electricity challenges including power outages, high transmission losses, dependence on imported fuels, limited renewable energy sources and massive circular debt, which is a cascade of unpaid government subsidies that results in the accumulation of debt on distribution companies.
The incumbent government has been striving to address these issues by modernizing grids and privatizing distribution companies.
Privatization of loss-making state-owned enterprises has long been on the IMF’s list of recommendations for Pakistan, which is struggling with a high fiscal shortfall and a huge external financing gap. Pakistan and the IMF reached a deal for a $7 billion bailout in July, which is pending approval from the lender’s executive board.
The IMF says SOEs in Pakistan hold sizable assets in comparison with most Middle East countries, at 44 percent of GDP in 2019, yet their share of employment in the economy is relatively low. It estimates almost half of the SOEs operated at a loss in 2019.
“The government in collaboration with the privatization commission will move forward with the privatization of discos by April next year,” Radio Pakistan quoted the energy minister as saying on Thursday.
Leghari said the first batch of power distribution companies would publish their expression of interest in April next year and final transactions were expected to be completed within three to six months after that.
Leghari has announced the privatization of the electricity distribution companies of Islamabad, Gujranwala, Faisalabad, Lahore and Multan.
Separately, the Pakistan International Airlines (PIA)’s privatisation process will be completed by October 1, Privatisation Commission Secretary Usman Akhtar Bajwa on Thursday told Senate Standing Committee on Privatisation.
During the session of the Senate Standing Committee on Privatisation, chairman Talal Chaudhry asked the secretary the reason for extending the date for the airlines’ privatisation process once again, inquiring if the date would exceed October 1.
“We are trying not to let the date exceed,” the secretary replied, adding that Prime Minister Shehbaz Sharif had said he did not want to extend the process beyond October 1.
The secretary went on to say that six companies were finalised for the national carrier’s bid, which included Fly Jinnah, Air Blue, Arif Habib Corporation, Y.B. Holdings, Pak Ethanol, and Blue World City.
The secretary noted the national flag carrier’s poor performance and deemed it close to “not functioning at all”, adding that the successful bidder would have to cover the gap of Rs80 billion in the first year.
