Power Theft Targeted for Crackdown

In Islamabad, the interim government has unveiled its strategy to combat widespread power theft and address the pressing issue of non-recoveries within the nation’s power system, which has ballooned to an astonishing sum of around Rs589 billion annually, equivalent to nearly $2 billion. These escalating losses have exacerbated the existing circular debt crisis, making the power system financially unsustainable and resulting in tariff hikes. In response to this critical challenge, the government is gearing up for an extensive crackdown on power theft, employing a comprehensive and forceful approach. In addition, they will implement a series of measures aimed at reducing these losses and restoring financial stability to the power sector.

During a news conference, Caretaker Power Minister Muhammad Ali and Information Minister Murtaza Solangi announced a robust crackdown to address mounting technical and commercial losses faced by power distribution companies. Despite limited options to address the issue, the interim government is taking action in response to public outrage over inflated electricity bills in August. Nationwide protests have left the government unable to provide immediate relief due to stringent IMF conditions.

Minister Muhammad Ali stated, “Some domestic consumers steal electricity, and others fail to pay their bills.” He disclosed that Pakistan currently has ten distribution companies (Discos), including K-Electric, and highlighted an annual loss of Rs589 billion due to electricity theft and unpaid bills, stressing that these factors drive up costs for other consumers. He emphasized that “until this is stopped, electricity prices will not come down” and mentioned that the prime minister has issued directives to tackle electricity theft and improve bill collection.

The minister pointed out that Discos with comparatively better recovery rates, such as Lahore, Faisalabad, Gujranwala, Multan, and Islamabad, incurred losses of 79 billion units, equal to Rs100 billion out of a total billing of Rs3,044 billion. Conversely, Discos in Peshawar, Hyderabad, Sukkur, Quetta, Tribal Areas, and Azad Jammu and Kashmir suffered losses of Rs489 billion due to their lower recovery ratio of up to 60 percent. Plans to use data for targeted crackdowns on areas with higher electricity theft were announced to address the problem.

The government is adopting a multi-pronged approach to address the issue, with the minister explaining, “Where theft is below 30 percent, we plan to employ technological solutions to curb it. In cases where losses range from 30 to 60 percent, we are exploring the possibility of involving the private sector in management.” Additionally, for areas experiencing losses exceeding 60 percent, stringent enforcement measures will be taken. Muhammad Ali also outlined government initiatives to enhance the management of distribution companies (Discos), stating, “We are reviewing the composition of their boards of governors and management, and changes will be made accordingly.”

Furthermore, the power minister secured the full support of provincial chief secretaries and police chiefs for the plan to combat electricity theft, which includes addressing complicit officials and reining in those who aid the pilferage of electricity. Efforts to reduce capacity payments are also underway, with a gradual process in mind. Regarding the future of distribution companies, both provincialization and privatization options are being explored, with a decision to be made in consultation with the cabinet.

Power Division Secretary Rasheed Langrial expressed a preference for privatization in the long run and mentioned the serious consideration of an initial public offering (IPO) for three companies, particularly for those Discos facing substantial losses due to low recovery rates resulting from theft and line losses. These companies would require preparations to become “privatization-ready.”