The best-performing state-owned power distribution company in Pakistan is loss-making. There are ten of them. There is one disco that made more losses than the more maligned Pakistan International Airlines. The total sector after-tax losses soared to a colossal Rs375 billion, more than double that from a year ago. The ten discos’ combined gross profit was in negative for the first time ever. Discos occupy seven positions in the top ten loss-making State-Owned Enterprises.

Dated as they may be, these are staggering numbers. Granted, the FY22 losses were inflated towards the end of the fiscal year, as the government notified relief across consumer categories, without providing for subsidies. The latest numbers from the distribution sector do not instill much confidence either, as the circular debt flow after having stemmed a little in FY23, is back with full force. Rs301 billion increased had been reported in the circular debt flow by October 2023, taking the stock to a colossal Rs2.6 trillion.

The losses are in addition to the subsidies that crossed Rs1 trillion for FY22, and Rs870 billion for FY23. Distribution companies’ after-tax losses as a percentage of revenues for the past ten years have averaged 12 percent of revenues. With the base tariff having gone considerably higher since FY22 – and no evidence of meaningful improvement in billing collection and T&D losses – expect the losses for FY23 and the ongoing fiscal year to be near Rs500 billion.

There are no quick fixes to the mess that the power sector has become today. Years and years of inaction, bad policy decisions and royal misgovernance have led to the situation. A few years ago, there were at least four distribution companies that were considered easy to sell. The rot is now so entrenched, that there may not be a single disco that attracts buyers at a good price. Needless to say, privatization is essential, but that alone won’t cut the deal.

The equation of power availability and affordability has gone haywire in recent times. Without fixing the affordability part of the equation, losses won’t be stemmed by just privatizing the discos. Given the nature of energy purchase contracts, chances of a substantial relief in the Power Purchase Pirce are slim to none. It is high time the authorities get their act together and think of ways to encourage more consumption. No system can compete with a 40 percent addition in capacity, with virtually stagnant demand growth.