The long-overdue agenda of privatisation is picking up pace. Bleeding airline PIA was finally done and gotten over with. They have now reached the point of finalising crew uniforms. It is a welcome sight. In contrast, Pakistan’s power distribution companies (DISCOs) are still at the expressions-of-interest stage, lagging behind in terms of progress. However, one cannot discuss the privatisation process without bringing up what has very recently transpired in the case of K-Electric (KE), which just saw its multi-year tariff plea dismissed by the regulator’s appellate tribunal. Many analysts have already stated that the decision to keep KE at a tariff of around Rs32 is not a good omen for private-sector entities operating in the energy space. DISCOs, which operate within their designated territories across the country, have the not-so-glamorous job of facing the public, collecting bills, handling complaints, and outages, as well as maintaining the network. When it comes to their privatisation and sell-off, the responsibility is much bigger. To take matters forward, Pakistan’s Privatisation Commission invited expressions of interest from foreign and local investors for FESCO, GEPCO and IESCO, the DISCOs slated for privatisation. But before we delve deeper into the mechanics of how privatisation is proceeding, one needs to take a trip down memory lane. Barring the recent ruling, the case of Shanghai Electric’s interest in K-Electric serves as a benchmark for the current privatisation drive as well. After nearly nine years of delay, Shanghai Electric Power terminated its $1. 77 billion proposal to acquire a controlling stake in KE in September 2025, citing unmet conditions and an adverse change in Pakistan’s business and regulatory environment. Had it closed, the $1. 77 billion acquisition would have been a game changer. It would have represented the biggest foreign investor interest since the telecommunications turnarounds of 2007-2009. Apart from the financial impact, the knowledge transfer could have helped Pakistan’s power sector move towards the reforms necessary for its transformation. Their auto giants have already caused ripples among the country’s car companies. Had the takeover succeeded, it would have stamped authenticity on a privatisation model based on strategic operators and motivations, as opposed to purely fiscal ones. The current drive would have had a template for sales while creating a live benchmark for performance-based regulation. More importantly, it would have positioned Pakistan as a country with the operational depth to deal with complex, high-value transactions in the power sector despite circular debt and policy risk. However, it became nothing more than a case study of how regulatory uncertainty can derail an investment with the potential to unlock new horizons. Another key determinant in Shanghai Electric’s decision to pull out was the 2018 Multi-Year Tariff (MYT) issued by NEPRA. It significantly dented profitability and lowered KE’s valuation, leading to a revised assessment. The MYT for a power utility determines its cost of doing business and is independent of the consumer tariff, which is uniform and separately determined. Any unforeseen reduction or revision can make an acquisition unviable for investors and subsequently lead to the termination of the agreement, as evidenced in this case. Standing today in 2026, KE has now seen its MYT for the control period FY24-FY30 — a decision that should have been issued in 2023 — reach a point where the company itself is uncertain about how it would manage day-to-day operations, let alone undertake further investment. For a utility operating in Karachi — Pakistan’s single most important economic and social focal point — this is saying a lot. But first things first: the government’s privatisation agenda. According to the Ministry of Privatisation’s official website, “The Privatisation Commission will engage with potential investors and power sector stakeholders to refine the existing DISCO tariff structure, MYT regime, business model, and framework for competitive suppliers. The proposed reforms aim to create a performance and efficiency-based return regime while enabling private sector buyers to leverage DISCO infrastructure and customer base for additional business opportunities. ” Performance and efficiency in the power sector are measured largely by two parameters: transmission and distribution (T&D) losses and recovery ratios. An overview of these parameters for all three DISCOs being put up for sale reveals that they have historically recorded single-digit T&D losses and an average recovery ratio of over 98 percent. This leads to the question: what are we trying to fix if it is not broken? The same website further states: “The Privatisation Commission emphasises that Pakistan remains committed to creating a predictable and enabling investment environment supported by policy continuity, regulatory transparency and institutional reforms. ” The one privatisation story we have to tell proves otherwise. The Shanghai Electric-KE episode illustrates how regulatory uncertainty, tariff redesign and circular debt can erode investor confidence and derail large FDI in distribution utilities. The latest decision by the tribunal raises another question mark. Regulatory certainty will be key to unlocking the full benefits of privatisation. This certainty is rooted in sound MYT allocations. Any changes to the cost of doing business are likely to receive a lukewarm response from investors, while significant changes to profitability, as seen in 2018, could lead to a reassessment of what the company is actually worth to them. The objectives of the current privatisation should, therefore, be examined closely. Policy pathways and regulatory procedures should aim to end recurrent fiscal leakage, improve service delivery, and introduce operating discipline. While a high sale price achieved by guaranteeing the buyer’s returns, shielding it from commercial risk, and passing every inefficiency on to consumers would be an accounting triumph, it would be a policy failure. No one wants to see a repeat of the IPP contracts and the renegotiation of terms 20 years down the line. The power sector and its customers have been through enough already. Perhaps the Shanghai Electric episode was a necessary lesson for the government to learn. After all, experience is the best teacher. However, if one has lived in Pakistan and followed its economy for as long as we have, one knows that this is a tall order.
DISCO privatisation: Lessons from K-Electric
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