IESCO seeks 54pc tariff increase as privatisation push targets balance sheet cleanup

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IESCO tariff increase & privatisation

Highlights

IESCO requested a 54pc tariff hike and a Rs157.864 billion Prior Year Adjustment to strengthen its balance sheet before planned privatisation.
NEPRA questioned the wisdom of absorbing accumulated adjustments in a single step and scrutinised IESCO’s Advanced Metering Infrastructure rollout strategy.
SEPCO reported only 36pc recovery versus Punjab’s 95pc, prompting regulatory concerns about its commercial viability ahead of potential privatisation.

Tariff proposal and regulatory scrutiny

As reported by Pakistan Business Recorder, IESCO presented its request during a public hearing held by the National Electric Power Regulatory Authority on Thursday, where the utility said it wants the higher tariff and a Prior Year Adjustment of Rs157.864 billion to improve its financial position before a proposed sale to private investors.

IESCO Chief Executive Officer Engineer Chaudhry Khalid Mahmood told the hearing the loss-making company has incurred billions of rupees in losses during 2025-26. The company's Chief Financial Officer said the Privatisation Commission, which is overseeing the planned sell-off, has directed that IESCO's balance sheet be cleaned up before it is offered to potential buyers.

The company said about 17pc of its electricity supply is linked to Azad Jammu and Kashmir, which adds to the financial burden reflected in the tariff petition. One intervener, Amir Sheikh, argued that if the government wants to supply electricity to AJ&K at a lower price, the resulting cost should be covered through subsidy rather than passed directly to consumers through tariffs.

NEPRA raised questions over IESCO's proposal to absorb the accumulated adjustments in one step. NEPRA Member, Tariff and Finance, Amina Ahmed said the exercise should have been carried out in phases instead of shifting the full burden through a single adjustment.

The hearing also reviewed IESCO's operating performance, including the installation of Advanced Metering Infrastructure meters in parts of Rawalpindi and Islamabad. NEPRA Member, Technical, Engineer Maqsood Anwar Khan questioned why the rollout did not start in areas with higher electricity theft, while the IESCO chief executive said urban areas were chosen first because city consumers were more sophisticated and familiar with different methods of theft.

Privatisation pressure on other discos

The same hearing also examined tariff petitions from Hyderabad Electric Supply Company and Sukkur Electric Power Company, both prepared under the guidance of the Power Planning and Monitoring Company, highlighting the broader operational challenges facing distribution companies earmarked for reform or privatisation.

HESCO's chief executive gave a positive assessment of the company's performance and sought approval of revised assumptions for the next calendar year. But MQM MPA Sabir Hussain Qaimkhani disputed the figures presented by management and urged NEPRA not to approve the revised tariff and assumptions, citing the absence of independent directors on the company's board.

SEPCO faced sharper criticism, especially over recovery and transmission and distribution losses. A company representative told the authority that recovery stands at only 36pc during 2025-26, prompting a NEPRA member from Sindh to contrast that level with Punjab-based distribution companies, where recovery is around 95pc.

Regulators also questioned whether SEPCO is commercially viable in its current form and whether existing improvement measures are sufficient ahead of any future privatisation. NEPRA's technical member said the company would struggle to attract a buyer in its current state, adding that while steps are being shown on paper, its actual condition remains very weak.

The proceedings underscore uneven readiness among the three utilities as the government advances plans to privatise selected power distribution companies. NEPRA is now set to scrutinise IESCO's proposed tariff increase and revised assumptions for CY27 before issuing its determination.

Our earlier article on India’s disinvestment programme explained that most proceeds in recent years have come from market-based routes such as ETFs and public issues, while strategic sales transferring management control have contributed relatively little. It also highlighted how the planned IDBI Bank stake sale could become a rare, outsized strategic transaction that materially improves the government’s receipts after multiple years of missed targets.

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