EDITORIAL: The Public Accounts Committee (PAC) has proposed delaying the privatisation of power distribution companies (Discos), which is planned to start in January 2027, with FESCO being the first to be privatised. The objection is premised on the lack of clarity and transparency regarding the DISCOs’ assets and liabilities.
It is a valid concern, as without proper valuation, a company can be sold at a higher or lower value than it is worth, putting either the buyer or the seller at a disadvantage. Moreover, it impacts consumers because DISCO tariffs are determined based on the return on their assets. A higher asset value means a higher valuation and a higher one-time return for the government. However, that would also mean higher monthly bills for consumers.
The question is why leave shades of grey when everything can be made black and white? Greater transparency would also help avoid unnecessary criticism, as seen in the case of PIA, where the common perception is that the airline was sold too cheaply. Some argue that its landing rights alone were worth more, while others criticize the government for retaining many of its liabilities. However, the company was perhaps sold at fair value, given its net asset position. Greater transparency in the transaction could have cleared the air and addressed many of these concerns.
Power sector distribution companies have altogether different dynamics. PIA did not provide an essential utility, and the vast majority of the population does not travel by air. Additionally, it has to compete with private players. The entire focus of its privatization was on cutting government losses, with the hope of reviving a brand that used to be the country’s pride in its prime.
There is nothing of the sort for power utility companies. Everyone who uses electricity is a consumer of these utilities, and electricity is deemed a basic necessity, as the normal functioning of any household is impossible without power. Electricity bills affect everyone, and the power supply chain is complicated.
That is why privatising these companies is an uphill task that requires major reforms. There are still many ifs and buts. While the privatisation minister is enthusiastic and has engaged the right international consultants, there is no need to rush the transactions, as doing so could create problems post-privatisation. The experience of KE, which continues to face challenges, serves as a strong reminder of what can go wrong.
In asset valuation, real estate represents the largest share. The government plans to exclude real estate from the transactions, as the properties will be transferred to the government and leased back to the utility companies. Even today, distribution companies value real estate at a nominal Re. 1, which keeps both asset values and tariffs low.
However, in the case of grids and other infrastructure, proper valuation is better. These are depreciating assets. And if the government values these assets higher, it may fetch a higher one-time return but would face the issue of recurring higher tariffs for consumers.
Utility companies in Pakistan, as in much of the world, are valued based on returns on their regulated assets. The Privatisation Commission is reportedly considering allowing a return of 14.5 percent on these assets. This makes asset valuation particularly important, as any upward revaluation could have direct implications for electricity tariffs. The government must consider all aspects. There should be transparency, and the leasing terms must be well-thought-out so that neither the government suffers a loss nor the buyer has to pay more, as the burden would eventually fall on poor consumers.
Copyright Business Recorder, 2026
Comments