Will electricity become cheap in Pakistan after DISCOs privatization?

ISLAMABAD: The privatization of Pakistan’s power distribution companies (DISCOs) is expected to improve operational efficiency, reduce electricity losses, enhance bill recovery and eventually help bring down power tariffs, said Privatisation Minister Mohammad Ali.

Speaking to ARY News programme On My Radar, about the government’s plans to attract private investment in the power distribution sector, Ali said lessons from previous experiences, including the renegotiation of Independent Power Producer (IPP) agreements, had been taken into account while structuring the DISCO privatization framework.

He acknowledged that investors in Pakistan’s power sector had experienced both positive and challenging conditions, particularly due to changes in government policies, regulatory uncertainty and political intervention. However, he said the current framework had been designed to address concerns arising from past experiences and provide investors with a more predictable environment.

According to Ali, the distribution sector offers an attractive investment opportunity because of its large consumer base and extensive infrastructure. Pakistan’s DISCOs collectively serve around 38 million consumers, providing private investors with access to a vast and established customer network.

He said the existing consumer database and infrastructure of distribution companies had not been fully utilized and could provide additional commercial opportunities for private-sector investors.

The infrastructure could also support new energy-related businesses, including solar power generation and battery-storage facilities, he added.

Ali further highlighted the potential for developing competitive electricity markets alongside the privatization of DISCOs. According to him, a more competitive market could eventually allow private owners of distribution companies to establish their own generation capacity and sell electricity, creating greater competition in the power sector.

He stressed that the key objective of privatization was not simply to transfer ownership but to improve efficiency across the electricity supply chain.

“Loss reduction and improved recovery will benefit both consumers and investors,” he said, adding that better collection and lower losses would eventually create room for improved electricity tariffs.

Read more: Electricity tariff hiked in Pakistan

Ali pointed out that electricity theft, unpaid bills and outdated infrastructure currently place an additional burden on consumers who regularly pay their bills. Modernizing the distribution network, including the wider deployment of smart meters, would therefore be essential to improving the sector’s performance.

He also said that reducing electricity tariffs would ultimately require greater competition in power generation, as generation accounts for the largest share of the underlying cost of electricity.

According to Ali, around 85% of the power cost, excluding taxes, is attributable to the generation component, while the return associated with distribution companies represents a relatively small portion of the overall electricity cost.

Pakistan currently operates under a single-buyer model, he said, adding that the government was working on measures to accelerate competition in power generation and encourage investment in renewable-energy projects.

However, Ali cautioned that consumers should not expect an immediate reduction in electricity prices following the privatization process.