Islamabad, Nov 10: The Competition Commission of Pakistan (CCP) has recommended that power distribution companies (DISCOs) should either be privatized or restructured through public-private partnerships (PPPs) to address chronic issues within the sector.
As detailed in CCP’s report, “State of Competition in the Key Markets in Pakistan: Power Sector”, these companies struggle with excessive distribution losses, financial leaks, poor bill recovery, widespread power theft, and constrained supply.
CCP’s Proposed Solutions
To combat these challenges, the CCP proposes either fully privatizing DISCOs or incorporating PPPs. Recent amendments to the NEPRA Act, which removed the exclusivity clause, now allow for greater private sector involvement. CCP also advocates dividing larger DISCOs into smaller, regional entities to encourage localized management and improved competition across the power distribution sector.
Reasons for Privatization
The CCP emphasizes that the global shift toward privatizing power utilities is based on the need to:
- Improve Efficiency of State-Owned Utilities: Address high costs, limited electricity access, and inconsistent service.
- Fill Funding Gaps: State-run utilities often lack the funds for essential upgrades and maintenance.
- Reduce Dependence on Subsidies: Redirect funds from subsidies toward other critical public expenditures.
- Generate Revenue: Privatizing assets provides immediate revenue for the government.
Persistent Issues in the Power Sector
The CCP report identifies several issues that hinder competition:
- Consumer Non-Compliance: High rates of electricity theft and non-payment of bills intensify financial pressures on DISCOs.
- Modernization Challenges: Institutional resistance to adopting new technology and practices impedes progress in efficiency.
- Governance and Accountability: Weak oversight, corruption, and management issues within state-owned utilities lead to operational inefficiencies.
- Barriers to Market Entry: Structural, regulatory, and anti-competitive actions by current players create obstacles for new entrants, limiting market competition.
Summary
Through privatization and PPPs, the CCP aims to reform Pakistan’s power distribution sector by reducing inefficiencies, fostering competition, and creating a business-friendly environment for investment.
