Govt mulls selling stakes in three major power distribution companies

The federal government 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 country’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 privatisation," 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.

Read more: Govt likely to handover DISCOs to provinces

The companies, which he termed high performing ones where there is high recovery of bills, are based in the major eastern urban centres of Gujranwala and Faisalabad, as well as in the capital, Islamabad.

He said that 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 "privatisation ready".

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

The caretaker energy minister Mohammad Ali, said that a crackdown will start to stop power theft of Rs589 billion ($1.92 billion).

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

The power sector has been specifically mentioned by the IMF, 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.