Major issues of Pakistan

Pakistan mulls IPO for three major power distribution companies

KARACHI, Pakistan: Pakistan is considering selling stakes in three high-performing state-owned power distribution companies through an initial public offering, officials said on Wednesday, as the country looks to resolve financial issues facing the debt-ridden sector.

The South Asian nation's power sector has been plagued by high rates of power theft and distribution losses, resulting in accumulating debts across the production chain - a concern also raised by the International Monetary Fund (IMF).

"Eventually, our way is through privatization," Secretary of the Power division Rasheed Langrial told journalists in Islamabad, adding that there was "serious thought" for an initial public offering (IPO) for three companies.

The companies, which he termed high-performing ones with high recovery of bills, are based in the major eastern urban centers of Gujranwala and Faisalabad, as well as in the capital, Islamabad.

He said other state-run companies that were making massive losses because of low recovery rates - due to theft and line losses - would need work to become "privatization ready".

There are ten distribution companies in Pakistan, which are locally called DISCOs.

The caretaker energy minister Mohammad Ali, said a crackdown will start to stop power theft of 589 billion rupees (US$1.92 billion).

Pakistan's resolve to undertake power sector reforms was crucial to reaching a staff-level agreement unlocking a US$3 billion standby arrangement from the IMF.

The IMF specifically mentioned the power sector, which called for a "timely" rebasing of tariffs to ensure that costs are recovered. This means hiking prices for consumers despite already record-high inflation.

(US$1 = 307.4000 Pakistani rupees)