Daily Times

In a shocking turn of events that has sent shockwaves through the nation, the Pakistani government has announced plans to privatize electricity distribution companies across the country. This move, ostensibly aimed at improving efficiency and reducing losses, has ignited a firestorm of controversy and allegations of corruption.

This move echoes the contentious sale of electricity services to Independent Power Producers (IPPs) and K-Electric years ago, which sparked a nationwide uproar. Now, the government is poised to sell off these assets again, in a dramatic re-run of the sale – a colloquial term for a deal perceived as less than beneficial for the public.

The Ministry’s recent notification outlines a detailed plan for the privatization of 10 key companies, with instructions for the sell-off of 12 organizations. The initial phase targets Faisalabad Electric Supply Company (FESCO), Gujranwala Electric Power Company (GEPCO), Hyderabad Electric Supply Company (HESCO), and Islamabad Electric Supply Company (IESCO). In the second phase, Multan Electric Power Company (MEPCO) and Peshawar Electric Supply Company (PESCO) will follow suit. The plan reveals an aggressive push to shift public utilities into private hands, raising questions about transparency, efficiency, and public interest.

While the government claims that privatization is the only way to save the ailing electricity sector, critics argue that it is nothing more than a scheme to line the pockets of the wealthy and powerful. They point to the fact that many of the companies involved in the privatization process have close ties to influential politicians and businessmen.

Amidst this turmoil stands Gohar Ejaz, a business tycoon who now positions himself as a saviour of the poor.

One of the most controversial aspects of the privatization plan is the involvement of FESCO, the largest electricity distribution company in Pakistan with over 5.3 million customers. FESCO has a long history of corruption and mismanagement, and many believe that it is not fit for privatization. Despite its numerous problems, FESCO has been earmarked for privatization. I argue that this is because FESCO has close ties to powerful politicians and businessmen who stand to benefit from its privatization.

Amidst this turmoil stands Gohar Ejaz, a business tycoon who now positions himself as a saviour of the poor and without his mention this saga would remain incomplete. Ejaz, who was a minister in the previous regime, suddenly seeks to challenge 40 IPPs in court. But why only 40, when there are over 100 in Pakistan? Critics argue that Ejaz’s selective battle reflects ulterior motives rather than genuine concern for the public.

Moreover, the textile industry, of which Ejaz is a key figure, has enjoyed a whopping subsidy of Rs. 19 billion per month for the last decade in the form of cheap gas. This totals a staggering Rs. 2,320 billion ($9 billion) over 10 years – nearly as much as Pakistan’s IMF loans during the same period. The public is left questioning why these subsidies, intended to lower production costs and boost exports, have not translated into tangible economic benefits.

The privatization of Pakistan’s electricity sector is also inextricably linked to the Independent Power Producers (IPPs). The IPPs were introduced by the previous governments as a way to address the country’s energy crisis. However, the IPPs have been accused of overcharging the government and consumers, and of benefiting from corrupt deals. One of the most shocking revelations about IPPs is the fact that many of them are owned by politicians and their families. This has led to allegations of nepotism and corruption.

The privatization saga also brings to light the dubious history of capacity payments to IPPs. Notably, Sulaiman Shahbaz’s IPP received over Rs 63 crores in just three months of 2024, despite operating at less than 65 percent capacity. Similarly, Javed Kayani’s Chinar Energy Limited, linked to the Sharif family, was paid Rs 11.9 crores for barely half its capacity.

The figures are staggering! Abdul Razzaq Dawood’s Rosh Power Limited raked in Rs 688 crores in 2023-24 for operating at just 4 percent capacity, costing Rs 745 per unit of electricity. Jahangir Tareen’s JDW Group IPPs received Rs 186.9 crores in capacity payments, while five Fuji Group IPPs were paid a jaw-dropping Rs 5,448 crores.

These payments, coupled with a questionable increase in electricity tariffs under the previous regime, paint a bleak picture of the sector’s mismanagement. The Nawaz government, notorious for paying off Rs 480 billion in revolving debt to IPPs without due diligence, set a precedent that haunts the nation to this day.

Another major scandal involving the electricity sector is the subsidy provided to the textile industry which is then used to generate electricity. The textile industry receives a massive monthly subsidy in the form of cheap gas of Rs 19 billion for the last 10 years, which amounts to Rs 232 billion annually. This subsidy causes the government billions of rupees and benefits the wealthy at the expense of the poor.

The privatization of Pakistan’s electricity sector is a complex and controversial issue. While the government may argue that it is the only way to save the sector, it is clear that there are serious concerns about corruption and cronyism. As the government pushes ahead with privatization, the nation stands at a crossroads.

The public, burdened with soaring tariffs and poor service, fears further exploitation. Gohar Ejaz’s crusade, while wrapped in populist rhetoric, fails to inspire confidence given his industry’s checkered past.

The writer is Foreign Research Associate, Centre of Excellence, China Pakistan Economic Corridor, Islamabad.