The Sustainable Development Policy Institute (SDPI) and Network for Clean Energy Transition (NCET) organized a consultative discussion on “Privatization of Pakistan’s power utility sector: Opportunities and the lessons learnt.” The event also showcased a report launch on prospects of privatization of Pakistan’s power utility sector.
Along with leading examples from across the world on privatization reforms and potential challenges, the report, which provided a critical review of K-Electric’s transformation journey, underscored that the power sector’s privatization was a strategic way forward to improve efficiency, achieve operational turnaround, and enhance consumer-centric initiatives. However, it strongly recommends executing it with a strategic and well-regulated approach that aligns with broader economic and environmental goals, including compliance with the Carbon Border Adjustment Mechanism (CBAM) and supporting green supply chains. In his welcome remarks, Deputy Executive Director of SDPI Qasim Shah said the session has been convened to benefit from K-Electric’s lessons in the power sector.
He underlined that the power sector was experiencing crises, including increased tariffs, taxation, political turmoil, and protests against power entities. The SDPI, he said, has the mandate to advise the government on key policy issues and social problems through dialogue with relevant stakeholders.
He added that the current power crises were mainly due to poor infrastructure, transmission lacunas, and outdated strategies.
Dr Khalid Walid, Research Fellow SDPI, briefly analysed the report titled “Privatization of Pakistan’s Power Utility Sector: Opportunities and the Lessons Learnt” in his presentation. He added that there is troika of economic turmoil, energy crisis and climate change woes unitedly driving the mix issues in the country. He said there are inefficiencies in the power sector in infrastructure, transmission and generation systems, whereas privatization is seen as a solution to reduce inefficiencies in the power sector. He also cited the best global examples of power sector privatisation, like in Chile and the UK, that reaped convincing results.
He said that in KE’s case, there have also been considerable benefits to the organization, consumers, and the economy. He added that K-Electric has cut its Transmission & Distribution (T&D) losses in half and doubled its power consumed and consumer base since privatisation. Khalid said K-Electric has also revolutionized its customer engagement through digital platforms that provide real-time billing updates, power outages, and other services. Citing the report, he said that KE has over 1.88 million consumers who are digitally connected with it today, unlike any other DISCO in the country. K-Electric has also been endorsed by the World Bank for saving 900 billion rupees for consumers and the Government through privatization.
He highlighted that power sector privatization was a strategic solution to ensure renewable energy integration, regulatory framework development, digitalization and enhanced consumer base.
“There is a need for the regulator’s role as a facilitator to allow more private entities to enter a competitive process, improve demand and industrialization support, increase market competition and effective wheeling reforms,” Dr Khalid said.
In his keynote address, the CEO of K-Electric, Syed Moonis Abdullah Alvi, said privatization of the power sector is the cornerstone of every sustainable development initiative for Pakistan. Before privatization, he said, K-Electric (which was KESC at that time) was receiving operational subsidies from the government to fund its operations, which was reduced to zero after its privatization. He said that KE has invested about USD 4 billion across its value chain since privatisation. Regarding Tariff Differential subsidy (TDS), Moonis underscored that TDS was being provided to consumers of Karachi and not to K-Electric.
He also added that KE’s success as a private entity was evident from the 15 bids it received for its renewable projects because the producer had confidence in KE meeting its expectations. He added that KE recently attracted the lowest bid of 3.88 cents for its renewable projects.
Ali Khizar – senior economist, while agreeing with Moonis, highlighted that the biggest benefit of privatization was that KE had no addition to circular debt; had there been other discos privatized as well, the circular debt would either be too low or non-existent. He highlighted that while the focus should be on the privatization of distribution companies, the immediate focus was on-demand stimulation for the power sector as it would reduce the menace of capacity payments.
Ameena Sohail, Former Advisor National Electric Power Regulatory Authority (NEPRA) said the Authority said that NEPRA’s role in privatization is important. She further added that post 2018, there has been tremendous development side on the regulatory side of the power sector, Government unfortunately has not given much attention to regulatory and legal changes and thus because of that the power sector is not producing the kind of performance improvement it should have been displaying. Furthermore, she added that if the Government wanted to privatize entities, it would need to give privatized entities an environment of competition.
Asad Mehmood, an Energy Expert, said the future of electricity distribution companies (DISCOS) hinged on their ability to adapt and thrive in an increasingly competitive and regulated market. “One of the most pressing needs is to increase electricity sales, which is essential for revenue growth and the broader expansion of our energy sector. Every DISCO stands to benefit from selling more, but achieving this requires a shift from the status quo.
To navigate this transition effectively, DISCOS must embrace a business-as-usual scenario that involves reimagining its operations. This means considering what value-added services can be introduced to enhance customer satisfaction and loyalty where KE stands out,” he said.
DG PPIB, Ameer Adil said power prices become affordable in competitive markets. In contrast, market liberalization is under discussion as third parties would be allowed in this regard while considering the purchasing power of our community.
Selina Irfan, an Energy Expert, said transmission lines are expensive, and the government has to do them, but the government is facing a paucity of funds. She emphasised that district generation off-grid solutions were necessary to go carbon-free as Pakistan is part of CBAM, under which every business will have to follow cross-border laws limiting carbon emissions in production lines.
The seminar ended strongly affirming privatization as a critical strategy for the future of the power sector. Experts unanimously highlighted the notable enhancements in K-Electric’s performance following privatization and recommended a similar and well-regulated model for other DISCOs to boost operational effectiveness and financial independence.
