The government of Pakistan has approached the World Bank (WB) for Non-Lending Technical Assistance (NLTA) to facilitate private sector participation in the privatization of power distribution companies (DISCOs). The Economic Affairs Division (EAD), in a letter to the World Bank’s Country Director, stated that the Ministry of Energy (Power Division) intends to avail WB’s support under NLTA for several key activities designed to enable private sector involvement in DISCOs.
The proposed activities include drafting guidelines for private sector participation in DISCOs and establishing a competitive process for inviting private investors and operators. Additionally, the plan involves conducting a financial sustainability and sensitivity analysis for the sector, including the development of a financial model for DISCOs, a framework for uniform tariffs, and procedures for managing DISCOs’ liabilities and subsidies.
Other significant activities under this initiative are updating the licensing eligibility criteria and rules for distribution and for the supplier of last resort, developing a communication strategy and implementation action plan, proposing a human resources strategy and action plan, and assessing the impact of market evolution on private sector participation in DISCOs.
The EAD has requested the World Bank to consider the Ministry of Energy’s proposal and indicate its commitment to support these initiatives under NLTA.
Recently, a high-level meeting chaired by Prime Minister Shehbaz Sharif decided to privatize certain power distribution companies. In Phase-I, Islamabad Electric Supply Company (IESCO), Gujranwala Electric Power Company (Gepco), and Faisalabad Electric Supply Company (FESCO) will be fully privatized. Phase-II will include the privatization of Lahore Electric Supply Company (LESCO), Multan Electric Power Company (MEPCO), and Hazara Electric Supply Company (HAZECO). For Sukkur Electric Power Company (SEPCO), Hyderabad Electric Supply Company (HESCO), and Peshawar Electric Supply Company (PESCO), long-term concession agreements will be offered to the private sector. Tribal Electric Supply Company (TESCO) and Quetta Electric Supply Company (QESCO) will remain under government control due to their unique conditions.
To facilitate this privatization process, the Privatisation Commission has been directed to hire a transaction advisor and complete the necessary formalities to finalize Phase-I transactions by January 2026. The Power Division will engage a technical advisor to review the regulatory and policy framework for the privatization and outsourcing of DISCOs.
In a related development, the government recently obtained approval for a new Board of Directors for DISCOs from the Cabinet Committee on State-Owned Enterprises (CCoSOEs). This followed the issuance of an ordinance to remove the existing boards, as the Power Division’s proposal to sack the boards was not aligned with the State-Owned Enterprises (SOEs) law. There are suspicions that some of the new board members have connections with potential investors interested in acquiring stakes in DISCOs. However, official circles have denied such speculations.
The new boards are expected to expedite the privatization process of DISCOs according to the government’s approved plan. Sources indicate that the restructured boards will play a crucial role in implementing the strategies necessary for a smooth transition to private sector management.
The government’s move to involve the World Bank and reconstitute the boards underscores its commitment to addressing the challenges in the power distribution sector. By seeking NLTA from the World Bank, Pakistan aims to ensure a transparent, efficient, and competitive process for privatizing DISCOs, ultimately leading to improved service delivery and financial stability in the power sector.
