Pakistan has given an ambitious deadline of December next year to sell its nine power distribution companies that are annually bleeding Rs700 billion, but the International Monetary Fund (IMF) has questioned the model that does not completely stop haemorrhaging even after privatisation.

The government has assured the IMF that it would sell these distribution companies by December 2027, except Quetta Electricity Supply Company, which alone caused Rs154 billion losses in fiscal year 2025.

The government plans to retain most of the past liabilities before the sale and would also continue with the highly uneconomical but politically correct policy of maintaining the same electricity price across the country for both privatised and state-owned entities, according to the sources.

The Privatisation Commission this week briefed the IMF about its plan to sell power distribution companies and its engagement with the prospective buyers. According to the Central Monitoring Unit of the finance ministry, the 10 power distribution companies caused Rs299 billion in losses and another Rs551 billion was given in subsidies during fiscal year 2025. This brings total annual bleeding to Rs850 billion.

The IMF was informed that the government would sell nine power distribution companies by the end of next December, with the first batch of three efficient companies to be sold by March next year. The government was earlier planning to sell these three companies by December this year, but its plan is facing at least a three-month delay.

The privatisation of Faisalabad, Gujranwala and Islamabad power distribution companies was at the due diligence stage, which the government now expects to complete in three months.

The IMF was told that Fesco will be sold in January, Gepco in February and Iesco in March next year. When contacted, the spokesman for the Privatisation Commission confirmed that the IMF has been given the first quarter timeframe to privatise the first batch of three power distribution companies.

The government has planned to sell nine of these entities in four different batches by taking advantage of a healthy momentum created by the sale of Pakistan International Airlines.

According to the spokesman, the second batch, comprising Hyderabad and Sukkur power distribution companies, would be privatised between April and June next year. Another four companies, Peshawar, Hazara, Lahore and Multan power distribution companies, are targeted to be sold by December next year, according to the Privatisation Commission.

However, Quetta, which caused Rs112 billion losses and consumed another Rs54 billion in subsidy in the last fiscal year, is not part of the privatisation plan.

According to the approved privatisation structure, the government will separate land as an asset and the liabilities of pensioners from the balance sheets of Faisalabad, Gujranwala and Islamabad power distribution companies. As of June 2025, the total liabilities of the retired employees of just three companies were equal to Rs312 billion, which may further jump due to the splitting of balance sheets based on March 2026 results.

In June last year, the total assets of these companies were Rs1.2 trillion compared to liabilities of Rs1.05 trillion, showing a total net positive equity of Rs145 billion. The assets and liabilities are planned to be parked in a Special Purpose Vehicle (SPV).

The sources said that detailed discussions were also held with the IMF about the government’s approved transaction structure, which would not end inefficiencies and the pressure on the budget would also remain even after privatisation.

The IMF also questioned the government about any lessons that it learnt from the controversial privatisation of K-Electric – the country’s only privatised entity. Despite privatisation, the government has kept Rs163 billion worth of subsidies in this fiscal year’s budget for K-E.

In case the final multi-year tariff of Rs32.37 per unit is implemented, the annual subsidy requirement would come down to around Rs120 billion.

The Privatisation Commission informed the IMF that it would continue the policy of uniform tariff post-privatisation of these entities. However, this negates the purpose of privatisation as the consumers of efficient power distribution companies would still be paying the cost of inefficiency in Quetta, Peshawar and Sukkur.

The spokesman for the Privatisation Commission said that the privatisation transactions are “being structured based on a uniform tariff continuing post-privatisation and the investors (have also been) informed about it”.

The IMF also inquired about the implications of carving out the liabilities from the balance sheets of the companies that would be sold. The lender was of the view that this model would not help stop the bleeding. But the Privatisation Commission officials took a stance that, on the same model, PIA had been privatised.

The government had parked Rs673 billion in losses in PIA Holding Company, which jumped to Rs817 billion as of June this year.

The spokesman said that it was “not correct” that the IMF has issues with the proposed privatisation structure that may reduce the bleeding for the government, but it doesn’t completely stop the building up of losses.