ISLAMABAD: The government has set December 2027 as the deadline for privatising nine power distribution companies (DISCOs), which together contribute heavily to the country’s fiscal burden, while the International Monetary Fund (IMF) has raised questions about a transaction structure that may not fully eliminate losses even after privatisation.
The government has assured the IMF that nine DISCOs will be sold by December 2027, excluding Quetta Electric Supply Company (QESCO), which incurred losses of Rs112 billion and received Rs54 billion in subsidies during fiscal year 2025.
According to the Finance Ministry’s Central Monitoring Unit, the country’s 10 DISCOs collectively recorded Rs299 billion in losses and received another Rs551 billion in subsidies during FY2025, bringing the total financial burden to around Rs850 billion.
The Privatisation Commission recently briefed the IMF on its plan to privatise the DISCOs and its discussions with prospective investors. The first three companies — Faisalabad Electric Supply Company (FESCO), Gujranwala Electric Power Company (GEPCO) and Islamabad Electric Supply Company (IESCO) — are currently undergoing due diligence.
The government had initially planned to complete their privatisation by December 2026, but the process has been delayed by at least three months. Under the revised schedule, FESCO is targeted for sale in January 2027, GEPCO in February and IESCO in March.
The Privatisation Commission has confirmed that the first batch is expected to be completed during the first quarter of 2027.
The second batch, comprising Hyderabad Electric Supply Company (HESCO) and Sukkur Electric Power Company (SEPCO), is scheduled for privatisation between April and June 2027. Peshawar Electric Power Company (PESCO), Hazara Electric Supply Company, Lahore Electric Supply Company (LESCO) and Multan Electric Power Company (MEPCO) are targeted for completion by December 2027.
QESCO has been excluded from the current privatisation plan due to its financial condition, having recorded Rs112 billion in losses and consumed Rs54 billion in subsidies during the last fiscal year.
Under the approved transaction structure, the government plans to separate certain assets and liabilities from the balance sheets of FESCO, GEPCO and IESCO before their sale. Land and pension liabilities would be carved out and transferred to a Special Purpose Vehicle (SPV).
As of June 2025, the pension liabilities of retired employees of the three companies stood at around Rs312 billion. The companies had combined assets of approximately Rs1.2 trillion against liabilities of Rs1.05 trillion, leaving net positive equity of around Rs145 billion.
The transaction structure has prompted discussions with the IMF over whether privatisation would sufficiently address the underlying inefficiencies and reduce the government’s financial exposure.
The IMF has also sought clarification on lessons learned from the privatisation of K-Electric, the country’s only privatised power distribution utility. Despite its privatisation, the government has allocated Rs163 billion in subsidies for K-Electric in the current fiscal year. The subsidy requirement could fall to around Rs120 billion if a proposed multi-year tariff of Rs32.37 per unit is implemented.
Another major issue is the continuation of a uniform electricity tariff after privatisation. The Privatisation Commission has informed the IMF that the uniform tariff policy would remain in place, meaning consumers served by more efficient privatised DISCOs would continue to pay the same tariff structure as consumers in areas served by less efficient utilities.
The commission’s spokesman said the transactions were being structured on the basis that the uniform tariff would continue after privatisation and that prospective investors had been informed of the arrangement.
The IMF also questioned the implications of transferring liabilities out of the DISCOs’ balance sheets before their sale. According to officials, the lender expressed concern that such a structure could reduce the immediate burden on the government without completely preventing future losses from accumulating.
The Privatisation Commission defended the approach, pointing to the restructuring model used for Pakistan International Airlines (PIA), under which significant liabilities were transferred to PIA Holding Company before the airline’s privatisation.
The government had initially transferred Rs673 billion in losses to PIA Holding Company, with the amount rising to Rs817 billion by June 2026.
The Privatisation Commission spokesman, however, rejected the suggestion that the IMF had objected to the proposed DISCO transaction structure, saying the model was designed to reduce the government’s financial burden while facilitating the privatisation process.
Story by Shahbaz Rana
