Privatization of distribution companies is the only solution to curb circular debt which currently has swelled to a staggering figure of PKR 573 billion. Transmission and Distribution losses due to power theft is the major cause of rising circular debt which should be immediately addressed.
During an interview on a private TV channel former prime minister Shahid Khaqan Abbasi shared these views. Citing the example of K-Electric, he said “Out of all distribution companies operating in Pakistan, privatized K-Electric is the only distribution company which regularly pays for the electricity provided by the government, while all other DISCOs have defaulted.”
Industry experts believe that circular debt has been affecting Pakistan’s power sector for years now and there is an urgent need for DISCOs’ turnaround. “While the country has attracted significant private capital in Generation and Transmission, by offering adequate returns to the private investors, there have been no progress on private participation in ex-Wapda DISCOs. Therefore, a significant quantum of power which is expected to be added to the national grid will not be distributed to the end consumers due to supply bottlenecks at distribution level.”
As the government is seeking private sector participation in the power distribution landscape, it should incentivize DISCOs’ tariff in terms of realistic benchmark setting, extending business risk protection and offering reasonable returns. This is the only scenario which can support the agenda for DISCOs to attract private capital in line with government’s overall vision to create a more efficient and private competitive market.