Government Moves to Accelerate Privatization of Power Distribution Companies

In a major step toward reforming Pakistan’s struggling energy sector, Prime Minister Shehbaz Sharif has directed authorities to fast-track the privatization of power distribution companies (DISCOs) and generation companies (GENCOs). The decision is being seen as a critical move to address long-standing issues such as electricity losses, poor recovery, rising tariffs, and the ever-growing circular debt.

According to officials familiar with the matter, the government believes that introducing private-sector efficiency and competition into electricity distribution is the most sustainable way to stabilize the power sector and improve service delivery for consumers across the country. Among the companies identified for early privatization are IESCO, FESCO, and GEPCO, which operate in some of Pakistan’s most economically important regions.

Government Moves to Accelerate Privatization of Power Distribution Companies

Why Power Sector Reform Has Become Urgent

Pakistan’s power sector has faced structural problems for decades. State-owned power distribution companies have struggled with weak governance, political interference, electricity theft, and inefficient billing systems. These issues have resulted in massive financial losses, forcing the government to provide repeated subsidies and bailouts.

Energy experts say that without deep reforms, the sector will continue to drain public finances and burden consumers with higher electricity bills. The government’s renewed push for privatization reflects growing recognition that the current model is no longer sustainable.

Officials say Prime Minister Shehbaz Sharif has emphasized that delay is no longer an option, and reforms must move forward decisively to protect the national economy.

DISCOs Identified for Privatization

The government has shortlisted several power distribution companies for privatization, focusing initially on DISCOs that either perform relatively better or operate in high-revenue regions. The goal is to attract private investors who can modernize operations, reduce losses, and improve customer service.

IESCO: First Candidate for Early Privatization

The Islamabad Electric Supply Company (IESCO) is considered one of the strongest candidates for early privatization. IESCO supplies electricity to Islamabad, Rawalpindi, Attock, Jhelum, and Chakwal.

Officials describe IESCO as a relatively well-performing utility with lower losses and better recovery compared to many other DISCOs. Its service area includes the federal capital, major government institutions, and a large base of commercial consumers, making it attractive to private investors.

Energy analysts say privatizing IESCO could serve as a test case for broader power sector reforms. If successful, it could build confidence among investors and the public.

“IESCO has strong revenue potential and comparatively modern infrastructure. Privatizing it could set the tone for future reforms,” an energy sector expert said.

FESCO: Key to Industrial Growth

The Faisalabad Electric Supply Company (FESCO) serves Faisalabad and surrounding districts, including Chiniot, Jhang, and Toba Tek Singh. Faisalabad is widely regarded as Pakistan’s industrial hub, particularly for textiles and manufacturing.

Industry representatives have long complained about power outages and inefficiencies affecting production. The government believes privatizing FESCO could significantly improve electricity reliability for industries, leading to higher exports and economic growth.

Officials say improved management and investment under private ownership could reduce losses, modernize infrastructure, and ensure uninterrupted supply to factories.

“Reliable electricity is essential for industry. Privatizing FESCO can directly support Pakistan’s export sector,” said a senior official in the Ministry of Energy.

GEPCO: Strengthening Power Supply in Export Regions

The Gujranwala Electric Power Company (GEPCO) provides electricity to Gujranwala, Sialkot, Gujrat, Narowal, and Hafizabad. These areas are known for export-oriented industries, including sports goods, surgical instruments, and ceramics.

Despite strong commercial activity, the region has faced challenges related to power theft and system losses. The government believes private-sector involvement can help address these issues through better monitoring, smart meters, and stricter recovery mechanisms.

Business leaders in the region have welcomed the idea, saying efficient electricity supply is essential for remaining competitive in international markets.

Other DISCOs Under Consideration

In addition to IESCO, FESCO, and GEPCO, officials say other distribution companies are also being reviewed for future privatization phases. These may include:

However, these companies may require further operational improvements before being offered to private investors.

Government’s Phased Privatization Strategy

The government has decided to adopt a phased approach to privatization rather than selling all DISCOs at once. This strategy is aimed at minimizing risks and ensuring a smooth transition.

According to sources, the phased plan includes:

  • Strengthening governance before privatization
  • Clearing legal and financial hurdles
  • Ensuring transparency in the bidding process
  • Protecting consumer interests through regulation
  • Addressing employee concerns

Officials say this approach will help avoid past mistakes and ensure long-term success.

GENCO Privatization Also on the Agenda

Alongside DISCOs, the government is also moving forward with plans to privatize generation companies (GENCOs). Many state-owned power plants operate at low efficiency and incur heavy losses.

Privatizing GENCOs is expected to bring fresh investment, modern technology, and better fuel management. Energy officials say this could lower generation costs and reduce pressure on electricity tariffs over time.

Why Privatization Is Seen as a Sustainable Solution

The government argues that privatization can address several core problems at once.

Improved Efficiency

Private companies are driven by performance and profitability, which often leads to better management and cost control.

Reduced Circular Debt

Stronger recovery systems and reduced losses can help control the circular debt that has plagued the energy sector.

Better Customer Service

Private operators are expected to invest in digital services, faster complaint handling, and accurate billing.

Lower Fiscal Burden

Reducing losses at DISCOs means fewer government subsidies, freeing funds for health, education, and development.

Role of NEPRA in a Privatized Market

Officials stress that privatization does not mean a lack of oversight. The National Electric Power Regulatory Authority (NEPRA) will continue to regulate tariffs and service standards.

NEPRA’s role will include:

  • Approving tariffs
  • Monitoring performance
  • Protecting consumer rights
  • Preventing monopolistic practices

This regulatory framework is intended to ensure fairness and transparency.

Concerns and Challenges

Despite broad support for reform, privatization has raised concerns among various stakeholders.

Fear of Higher Electricity Prices

Some consumers worry that private companies may raise tariffs. The government insists tariffs will remain regulated.

Employee Job Security

Thousands of workers are employed by DISCOs. Officials say employee protection and transition plans will be part of the privatization process.

Transparency Issues

Experts stress the need for a transparent and competitive bidding process to maintain public trust.

International Experience and Lessons

Many countries have reformed their power sectors through privatization, including the United Kingdom, Turkey, and parts of India. These examples show that while challenges exist, strong regulation and competition can deliver positive results.

Pakistan aims to adapt these lessons to local conditions.

Expected Impact on Consumers and Economy

If implemented effectively, privatization could lead to:

  • Fewer power outages
  • Improved billing accuracy
  • Faster service delivery
  • Increased industrial productivity
  • Greater investor confidence

Economists say reliable electricity is essential for sustainable economic growth.

Political Commitment and Next Steps

Officials say Prime Minister Shehbaz Sharif is personally monitoring progress and has instructed relevant ministries to remove bureaucratic delays. The Privatization Commission is expected to announce timelines and transaction structures in the coming months.

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