Privatisation has long been presented as the solution to Pakistan’s power sector crisis, but our reality shows how deeply resistant we remain to the very concept. We are a country that struggles to accept when a company earns profit through efficiency. The moment a private enterprise becomes financially successful, suspicion replaces appreciation, as if profitability itself were a betrayal of public service. This mindset has kept our power and gas sectors locked in mediocrity, feeding inefficiency rather than reform.

Despite years of reform talk, both the electricity and gas sectors remain firmly controlled by the government. Bureaucratic red tape dictates decisions more than market competition or consumer welfare. Even in the gas sector, when private players attempt to enter, state-run entities often block them by manipulating gas transportation tariffs or procedural hurdles. These actions discourage investment and ensure the old monopolies stay intact under the guise of “national interest.” In truth, this is an interest defined by control, not by consumer benefit.

The same problem exists in the power sector. No matter how much policymakers speak of competition and efficiency, the state remains unwilling to relinquish authority. Every effort to bring in private participation is bogged down by ministries, regulators, and committees that act as gatekeepers instead of facilitators. The end result is neither a public system that works nor a private system that is allowed to work, just a hybrid structure where inefficiency, losses, and political interference thrive side by side.

Another major structural flaw lies in how Pakistan regulates its energy system. Two separate regulators — NEPRA for electricity and OGRA for oil and gas — work under two Ministries, the Power Division and the Petroleum Division, each following its own policies and priorities. The Petroleum Division also oversees the gas sector, which further blurs responsibilities and coordination. This divided framework often produces contradictory decisions. For instance, one authority may encourage industries to shift from gas-based captive generation to grid electricity to utilize surplus capacity, while another fails to eliminate cross-subsidies from tariffs to make it competitive, discouraging that very shift and hence both lose that consumers. With electricity average fuel cost at Rs 10 per unit, at max the power tariff should be Rs 25 per unit and not Rs 35. The country needs a harmonized regulatory and policy framework that ensures coherence instead of conflict, and long-term planning instead of administrative silos.

The government’s approach to privatisation is also backward. It hesitates to privatize entities that make money, fearing criticism for “selling profitable assets,” while the loss-making companies, the very ones that need private discipline, are kept under state control. Privatisation, in its truest sense, is about transferring inefficient public enterprises into capable private hands so they can be revived. Instead, we cling to failing ones and debate endlessly about profitable ones.

Our loss-making distribution companies (DISCOs) are the clearest example of this dysfunction. Every year they bleed billions in theft, poor recovery, and political interference. Their losses are taxpayer-funded or passed onto consumers as surcharge. Yet rather than offering them for privatisation under transparent frameworks with performance-linked accountability, the government retains them, ensuring the cycle of inefficiency continues. These are the companies that should be privatized first, not the ones that already function well.

K-Electric stands as the defining case study in Pakistan’s uneasy relationship with privatisation. Almost two decades after being privatized, K-Electric remains neither fully private nor fully independent. The company’s management spends more time in Islamabad trying to secure fuel allocations, tariff approvals, attending Standing committee meetings and regulatory permissions than it does improving service in Karachi. Even the simplest incentive packages, like the Covid-era incremental package for industrial consumers, were delayed for years because of bureaucratic wrangling — and to this day, the COVID incremental package has still not been received by Karachi’s industrial consumers. Every decision that should be commercial becomes political. The irony is that Karachi’s citizens still hold K-Electric accountable for service issues, while the company itself remains bound by layers of federal control.

The K-Electric experience reveals a broader truth: Pakistan has not yet developed the maturity to let privatisation function as intended. We privatise entities but continue to govern them like bureaucracies. Until we accept that private utilities must operate under clear commercial rules, free from day-to-day government interference, privatisation will never deliver its promise.

The upcoming Competitive Trading Bilateral Contract Market (CTBCM) was meant to usher in genuine competition by allowing large consumers to buy electricity directly from producers. Yet if distribution companies are not allowed to ringfence their supply arms and compete fairly, CTBCM will merely reproduce the same monopolies under new names.

The DISCOs must have the autonomy to sell directly to industrial consumers; otherwise, they will be reduced to line-rent collectors, bearing the burden of losses without the ability to earn and will survive on nothing else but consumer or taxpayer funded subsidies. No investor will risk capital in a “wire business” that serves theft-prone, subsidized customers and is denied access to industrial clients who could actually pay.

Privatisation cannot succeed without clear commercial autonomy and a level playing field. Investors will only come if they are assured of regulatory consistency, fair pricing mechanisms, and the right to compete on performance rather than politics. A distribution company restricted to collecting line rent and managing high-loss areas is not a business opportunity — it is a financial trap, We are copying and pasting successful electricity market examples from various countries, without any concrete evidence or thought if they suit us or not. Who will check the actual subsidy utilization of private DISCOs? No one knows.

For Pakistan to move forward, policymakers must show the courage to break old habits. Reform is not achieved by forming new committees or drafting new policies every few years; it requires freeing institutions from political micromanagement and bureaucratic strangleholds. The power sector must move from dependence on government budgets to a sustainable, competitive structure.

The way forward is clear. First, unify the regulatory and policy direction between Nepra and Ogra to ensure decisions are aligned and mutually reinforcing. Second, prioritise privatisation of the worst-performing DISCOs with transparent contracts that reward efficiency and protect consumers. Third, empower private utilities to operate under stable, market-based rules without constant political interference. Finally, ensure that in the CTBCM environment, DISCOs are ringfenced and given the right to sell directly to industrial users promoting competition, only then will they have real commercial value and attract investors.

Privatisation of power sector entities in Pakistan has failed not because it is a bad idea, but because we never truly implemented it. We privatized ownership while keeping control centralized. We created regulators but never freed them from government influence. We spoke of markets but designed them to exclude competition. The private sector was invited in but never trusted.

If policymakers truly wish to reform Pakistan’s power sector, they must let go of the illusion that control equals stability. Real progress will come only when the government steps back, the ministries and regulators coordinate, and private players are trusted to do what they do best, deliver efficiency through competition. Until then, privatisation will remain another costly illusion, or perhaps a bitter truth we are still unwilling to face.

Note: This article appeared in the Business Recorder on Oct 08, 2025.