Pakistan power sector privatization targets three DISCO sales in early 2027

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Power sector privatization 2027

Highlights

Pakistan aims to privatize Faisalabad Electric Supply Company, Gujranwala Electric Power Company, and Islamabad Electric Supply Company in the first quarter of 2027 after due diligence delays.
The proposed privatization safeguards address regulatory uncertainty and tariff revisions, with investor returns to be denominated in Pakistani rupees and linked to inflation.
Reform framework mandates smart metering, loss reduction, and performance penalties for DISCOs, with public rollout of proposals expected by mid-November 2024.

Privatization timeline and transaction structure

As reported by Business Recorder, citing the Privatisation Commission, Prime Minister’s Adviser on Privatisation and Chairman of the Privatisation Commission Muhammad Ali says due diligence for Faisalabad Electric Supply Company, Gujranwala Electric Power Company and Islamabad Electric Supply Company is already under way, while potential investors have requested more time to assess the complexity of the deals.

The government had initially planned to hold bidding in December, but the timetable may slip slightly, with the target now set for the first quarter of 2027. Work has also started on the privatization of Hyderabad and Sukkur power distribution companies, with those transactions expected in the second quarter of 2027, while Lahore, Multan, Peshawar and Hazara distribution companies remain in the program for the second half of 2027.

Muhammad Ali says the government is preparing safeguards to address investor concerns over regulatory uncertainty, tariff revisions and protection for long-term investments, issues that have also surfaced in reference to K-Electric. Those measures include finalizing investment plans and multi-year tariffs before bidding, while investor returns are expected to be denominated in Pakistani rupees rather than dollars and linked to inflation under the capital asset pricing model.

He also says DISCO employees will be protected during the transition, with investors barred for a defined period from taking adverse action against workers or altering their employment terms. According to the adviser, employees remain essential to operating the electricity distribution system after privatization.

Reform goals and wider economic impact

Muhammad Ali describes power sector reform as a national security issue, arguing that high energy costs are weakening industrial competitiveness, exports and broader economic growth. He says Pakistan needs to lower electricity tariffs and introduce greater competition in the power supply market to reduce the risk of consumers and industries moving away from the national grid.

The reform framework prepared by the Privatisation Commission covers tariff structures, investment plans, business activities and the rollout of a competitive electricity market. The government intends to share the proposals publicly by mid-November after consultations with relevant institutions, the prime minister and the steering committee.

Under the proposed approach, DISCOs would be required to improve performance through smart metering, technology adoption, reduced electricity losses, stronger bill recovery, uninterrupted supply and better load management. Investors would face penalties for missing performance benchmarks, while gains from improved efficiency and lower losses would also be shared with consumers.

The proposals also aim to gradually move away from a uniform electricity tariff by introducing a competitive supplier system, while keeping a supplier of last resort for customers who cannot access competitive providers. Beyond electricity distribution, the government is also examining the privatization of Pakistan State Oil, Sui Southern Gas Company and Sui Northern Gas Pipelines Limited, although strategic activities of PSO may remain under state control.

In our earlier coverage of India’s disinvestment programme, we noted that most proceeds since FY2016 have come from market-linked routes such as ETFs, public issues and buybacks, while strategic sales transferring management control have played a much smaller role. The report highlighted how the planned IDBI Bank stake sale stands out as an unusually large strategic transaction that could materially improve the government’s ability to meet its annual disinvestment target after years of shortfalls.

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