CCP recommends privatization, public-private partnerships for power distribution companies

The Competition Commission of Pakistan (CCP) has recommended the privatization or establishment of public-private partnerships (PPPs) for existing power distribution companies (DISCOs) to address critical inefficiencies and enhance competition in the power sector.

The recommendations were outlined in CCP’s recent report, “State of Competition in Key Markets in Pakistan: Power Sector,” which highlights persistent issues faced by DISCOs, including high distribution losses, low bill recovery rates, electricity theft, and revenue leakages. 

The CCP report points to global trends, where countries have privatized state-run utilities to leverage market dynamics and reduce government dependency. Key drivers behind this shift include the underperformance of state-owned utilities, the need to eliminate subsidies, a shortage of state funds for essential investments, and the opportunity to generate government revenue through asset sales.

According to CCP, these issues have been an ongoing concern for successive governments, hampering the sector’s performance and reliability. With recent amendments to the NEPRA Act removing the exclusivity clause, CCP sees an opportunity for reform, suggesting full privatization or PPP models to reduce distribution losses and improve market operations. 

The report also proposes breaking down large DISCOs into smaller, localized units to foster competition, enhance efficiency, and attract more players to the distribution sector.

The report further highlights ongoing challenges in Pakistan’s power sector, including high rates of electricity theft, non-payment of bills, institutional inertia, and a reluctance to adopt modern technology. CCP notes that these factors contribute to poor service quality, customer dissatisfaction, and discourage both domestic and foreign investment.

CCP’s analysis indicates that regulatory barriers, structural constraints, and anti-competitive practices restrict new entrants, protecting incumbents and limiting competition in the sector. The report emphasizes the need for structural reforms to create a more competitive and efficient power market in Pakistan.