Government Considers Privatizing Power Companies as Circular Debt Soars to Rs2.3 Trillion

The government in Pakistan is thinking about doing two things to solve a big money problem in the power sector. First, they might sell the power generation and distribution companies to private businesses. Second, they could let private companies manage these companies for 20 to 25 years. This is because the circular debt in the power sector has become a big issue, reaching a huge amount of Rs2.3 trillion. This debt is a big Risk to the Power Sector’s Future. Also, the circular debt in the gas sector is even bigger, reaching Rs2.8 trillion. When we add these two debts together, it’s a massive Rs5.1 trillion, which is more than $17 billion!

The Energy Minister, Muhammad Ali, has said that they’re considering giving control of some power plants and distribution companies to private companies for a long time. This will Help these Companies invest in and improve the Power Sector. They are also talking to the World Bank’s International Finance Corporation about this.

Some of the power plants they might sell or let private companies manage include Haveli Bahadur Shah, Balloki, Guddu, and Nandipur. The government is thinking about three options: giving power distribution companies to provincial governments, selling them completely, or letting private companies manage them through long-term agreements. They are discussing the last two options with the Privatisation Commission.

Once private companies take over, they might not have to charge the same prices for electricity. Different Companies could have different Prices. This could lead to more efficient Companies charging lower Rates. Selling state-run companies will reduce the government’s financial problems, meaning they won’t need to give as much money in subsidies or face losses.

The Energy Minister also talked about choosing the right people for the company boards and maybe making some companies public (which means people can buy shares). He said this could Help the Economy Grow, create jobs, and bring in more Taxes.

The minister also said that gas availability in the winter will be like last year, and some areas might have to deal with gas shortages. The Government is Planning to increase gas Prices. People who use less gas might see a smaller monthly increase, but those who use more could see bigger price hikes.

Read more Government’s Plan to Help with High Electricity Bills Shared with IMF

The government plans to stick to agreements they made with companies for power production, even if they’re not great for Pakistan. The minister also Talked about ways to Reduce the circular Debt, like lowering Costs, extending loan terms, making more power in Pakistan, and improving Power lines.

Read more Discos Apply for a Rs1.829 per Unit Increase in Electricity Prices

The gas sector is losing a lot of money each year, about Rs350 billion, which is worrying. Pakistan is buying more Gas from other Countries, and the cost of buying it is Higher than what they sell it for, which is making the gas debt go up even faster