ISLAMABAD: 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.
Traders in Pakistan went on strike on Wednesday, shutting down their businesses in all major cities and urban areas to protest a rise in electricity costs, new taxes imposed on shop owners and brisk inflation.
In May, Prime Minister Shehbaz Sharif said Pakistan would privatize all state-owned enterprises, with the exception of strategic entities, broadening its initial plans to sell only loss-making state firms to shore up its shaky finances.