The government has cleared one legal question hanging over DISCO privatisation. The Privatisation Division says it does not need fresh approval from the Council of Common Interests (CCI) to sell the state’s power distribution companies, because the CCI already approved their privatisation in 2011, Business Recorder reported on 14 October. The answer matters because the sale programme is promised to the IMF, and the companies it covers cost the state about Rs850bn in losses and subsidies in FY2025.
The short version
- The Privatisation Division says a 2011 CCI decision covering nine DISCOs and three generation companies is enough; the Law Division reconfirmed this on 25 September 2026.
- The government has told the IMF it will sell nine DISCOs by December 2027, starting with FESCO, GEPCO and IESCO in early 2027.
- All 10 DISCOs ran up Rs299bn of losses and received Rs551bn of subsidies in FY2025, according to the Finance Ministry’s monitoring unit.
- Separately, NEPRA has asked the government to repeal five old power rules that now overlap its newer regulations.
What happened
Responding to a sub-committee of the Senate’s Functional Committee on Devolution, the Privatisation Division cited two earlier decisions: the CCI’s 2011 approval to privatise three generation companies and nine distribution companies, and a CCI approval of 21 June 2021 endorsing the National Electricity Policy, which tells the government to explore privatisation of state-owned entities. A Law Division letter dated 25 September 2026 reconfirmed that “fresh CCI approval is not required”, according to Business Recorder. The question had been raised amid scrutiny of the federal government’s authority over power utilities and the CCI’s role.
The sale timetable has already slipped. Energy Update reported on 5 October that the first batch, originally due by December 2026, is now targeted for FESCO in January 2027, GEPCO in February and IESCO in March. HESCO and SEPCO follow between April and June 2027, and PESCO, Hazara Electric, LESCO and MEPCO by December 2027. QESCO is excluded.
Subsidies, not reported losses, are the bigger cost of the DISCOs
Power distribution companies, Rs billion, FY2025 (pension figure is a liability at June 2025)
Why it matters
A dispute over CCI approval could have pulled the provinces into the process and delayed a programme the government has committed to the IMF. Settling it on paper removes one obstacle to DISCO privatisation, though the Senate committee’s scrutiny shows the constitutional question is not closed politically. The economic stakes are large: distribution losses and subsidies feed straight into the circular debt and into what businesses pay for power, which is why industry has been pushing back on Rs268bn of old costs in the 2027 electricity tariff. The sales are also part of the wider programme Finance Minister Aurangzeb has tied to his above-4% growth forecast.
The knock-on effects
First order: bidders get a clearer legal path
Investors doing due diligence on FESCO, GEPCO and IESCO want certainty that a sale cannot be unwound later. A Law Division opinion helps, but it is an opinion, not a court ruling. The three companies had about Rs1.2trn of assets and Rs1.05trn of liabilities at June 2025, leaving net equity of about Rs145bn, Energy Update reported.
Second order: the state keeps the legacy costs
The plan moves land and about Rs312bn of pension liabilities into a special purpose vehicle before sale. Energy Update reported that the IMF questioned whether this would cut future losses or only the government’s immediate burden; the Privatisation Commission denies the IMF objected to the structure. A uniform national tariff will continue, so customers of efficient and inefficient DISCOs will still pay the same rates.
Third order: the rulebook is being cleaned up
In a letter to the Cabinet Division, NEPRA warned that old rules and its newer regulations “now cover the same subject matter”, risking legal uncertainty. It wants five rules repealed, starting with the 2005 distribution performance standards, replaced by regulations notified on 18 September 2026. The Power Division must examine the request before it goes to the federal cabinet. Clearer rules matter to private owners, who will be held to those standards; NEPRA’s earlier move on wheeling charges for the open power market is part of the same shift.
Who could benefit
- Prospective bidders: a firmer legal basis and a published timetable for nine companies.
- The federal budget: if private owners cut losses, the Rs551bn subsidy bill could shrink over time.
- Advisers and lenders: due diligence, financing and transaction work across three batches.
Who may face pressure
- DISCO employees and pensioners: their pension rights move to a separate vehicle.
- Customers of high-loss areas: private owners may enforce bill collection more strictly.
- Provinces: some may still contest the federal reading of the CCI’s role.
What to watch
- Whether the Senate sub-committee or any province challenges the Privatisation Division’s position.
- FESCO’s targeted sale in January 2027, followed by GEPCO (February) and IESCO (March).
- A federal cabinet decision on NEPRA’s request to repeal the five old rules.
- The IMF’s next review comments on the special purpose vehicle structure.
Sources
- Business Recorder, PD says no fresh CCI approval needed for DISCO privatisation, 14 Oct 2026
- Energy Update, Govt sets December 2027 deadline to sell nine DISCOs, 5 Oct 2026
- Business Recorder, Power regulator urges govt to repeal five existing rules, 14 Oct 2026
This is analysis, not investment advice. Figures are as of 14 October 2026.
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