ISLAMABAD: The Power Division is set to sign Public Service Obligation (PSO) agreements with power Distribution Companies (DISCOs) for the management of tariff subsidies, relief packages, and the collection of statutory surcharges under the National Electric Power Regulatory Authority (NEPRA) Act, informed sources told Business Recorder.
According to sources, the move is being undertaken in line with the State-Owned Enterprises (Governance and Operations) Act, 2023, which allows the federal government to assign specific public service obligations to state-owned enterprises (SOEs).
Historically, DISCOs have been carrying out several public service functions on behalf of the government, including the administration of tariff differential subsidies, tariff relief packages, special discounts, and the collection of statutory surcharges. These operations have been conducted under the Tariff Subsidy Standard Operating Procedure issued on January 13, 2025, along with directives periodically issued by the federal government.
Sources said the proposed PSO agreements aim to formally recognize and standardize these arrangements in accordance with the SOE Act. Under the agreements, the services already being performed by DISCOs will be officially classified as public service obligations.
The draft PSO Agreement has reportedly been prepared in consultation with DISCOs and external consultants following approval of the SOE (Ownership & Management) Policy, 2023. Board resolutions from all DISCOs are also being sought to facilitate execution of the agreements.
Under the proposed framework, the Government of Pakistan — through the Ministry of Energy and Finance Division — will act as the first party, while NEPRA-licensed distribution and supply companies will serve as the second party.
The agreements cover the management and administration of tariff subsidies and relief packages, as well as the collection and deposit of surcharges under the NEPRA Act. The government will reimburse eligible expenses incurred by DISCOs for carrying out these obligations, while designated service areas will be assigned under federal guidelines.
Sources further revealed that the agreements will remain effective from the date of signing until expiry or earlier termination by the federal government. Any disputes arising under the agreements will be referred to the Secretaries of the Finance Division and Power Division for resolution.
The proposal was presented before the Economic Coordination Committee (ECC) of the Cabinet on April 27, 2026. However, the ECC directed that the matter be reviewed by the Cabinet Committee on State-Owned Enterprises (CCoSOEs) due to its linkage with the SOE Act, 2023.
Subsequently, the Power Division sought approval of the draft PSO Agreement for further processing and timely execution with DISCOs, particularly in view of commitments and conditions agreed upon by the Government of Pakistan with international financial institutions.
Story by Mushtaq Ghumman
