EDITORIAL: Pakistan’s power sector remains a study in chronic dysfunction, marked by inefficiency and entrenched governance failures. While the sector’s circular debt stood at Rs1.66 trillion in July 2025, marking a modest decline from previous levels, this reduction failed to mask deeper structural flaws: a costly and inefficient power generation mix, a mismanaged Central Power Purchasing Agency and most critically, a collapsing distribution system bleeding revenue through electricity theft, line losses and misgovernance.
The distribution companies (DISCOs), in fact, perfectly embody the sector’s systemic decay, plagued by weak oversight, political interference and a complete absence of accountability. It is this governance crisis that has drawn renewed scrutiny, with a recent Asian Development Bank (ADB) mission to Pakistan underscoring the enduring rot that keeps the sector financially fragile and operationally adrift.
As the ADB mission noted in its discussions with stakeholders, DISCOs remain burdened by high transmission and distribution (T&D) losses, dismal recovery rates and rampant power theft. In FY2024-25, for instance, T&D losses alone were a massive Rs265 billion, a loss rate of 17.6 percent, which far exceeded the targeted T&D loss rate of 11.7 percent.
These figures expose a deeper governance malaise — a frail regulatory environment, inept management and systemic opacity — preventing DISCOs from serving consumer interests or sustaining the integrity of the wider energy supply chain. Their consequent poor financial performance has also barred them from accessing commercial credit, forcing reliance on dwindling public and donor funding, and leaving them unable to invest in essential infrastructure upgrades required for reducing T&D losses and guaranteeing reliable electricity supply.
Another long-overdue priority for DISCOs is modernising their outdated IT systems, including the rollout of Advanced Metering Infrastructure (AMI) and Advanced Planning and Monitoring Systems, to curb system losses, improve bill recovery, and improve service reliability. These technologies, which are central to the government’s reform agenda, can enable real-time monitoring, smarter consumption decisions and data-driven grid control.
Their success, however, depends on careful planning, a high level of technical expertise and a phased implementation strategy, and given DISCOs’ weak institutional capacity and poor execution record, their ability to deliver such transformation remains doubtful.
Furthermore, the ADB has also rightly expressed concerns regarding the power sector’s ability to effectively handle the growing integration of alternative energy sources, particularly rooftop solar, which is straining outdated grid operations, causing voltage instability, reverse power flows, inducing stress on aging transformers, and rendering energy forecasting and load balancing increasingly challenging.
It is equally important to recognise that the power sector’s dysfunction extends far beyond DISCOs, and directly impacts other parts of the economy, most notably the oil and gas industries that underpin energy supply. Chronic inefficiencies, including delayed payments from the CPPA-G (Central Power Purchasing Authority-Guaranteed) and state-run utilities have left fuel suppliers burdened with mounting receivables, disrupting cash flows and constraining fuel imports and production.
Erratic power generation and poor demand forecasting further distort supply planning, leading to higher costs. This financial and operational breakdown cascades through the entire energy chain, eroding its stability and liquidity, and saddling Pakistan’s industries with some of the highest electricity costs in the region.
Reforming Pakistan’s power sector, then, requires more than piecemeal fixes. It demands structural overhaul. The national grid must be modernised to reduce technical losses, and the tariff framework made truly cost-reflective, aligned with the real price of generation, while shielding lifeline consumers through well-targeted subsidies.
Expanding AMI (Advanced Metering Infrastructure) deployment is equally essential to improve billing accuracy, boost recovery and curb theft, complemented by prepaid systems in high-pilferage areas. Lasting progress, however, will depend on governance reforms: privatising inefficient DISCOs, insulating them from political interference and phasing out loss-making power generation plants. Without these fundamental changes, the sector will remain mired in inefficiency and financial turmoil.
Copyright Business Recorder, 2025
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