Reforming Pakistan’s Power Distribution Sector

Distribution sector in Pakistan is undergoing a significant policy shift, as the government pursues a multi-phase privatization plan for distribution companies (DISCOs). However, longstanding structural issues including inefficient cost recoveries and regulatory limitations continue to undermine these reforms. This paper draws from data from NEPRA, international case studies and insights from discussions with experts. It contends that some foundational reforms are necessary prerequisites to successful privatization of DISCOs. These reforms include tariff restructuring, strengthening regulatory capacity and corporatization. It also explores alternative models, including performance-based management contracts and commercialization strategies as a viable way forward to address persistent operational inefficiencies without immediate asset transfer. It underscores that in the absence of such reforms, privatization risks replicating past mistakes rather than resolving them.