Pakistan launches major digitization reform to modernize power distribution network

ISLAMABAD: Pakistan’s energy ministry has launched a major digitization reform to modernize the country’s power distribution network to curb power sector losses, the information ministry said on Monday.

The energy ministry has signed a Transaction Advisory Services Agreement (TASA) with the International Finance Corporation (IFC), under which the IFC will act as transaction adviser and conduct a comprehensive techno-commercial assessment for a service-provider model or public-private partnership framework to support the rollout of smart metering infrastructure for 10 million single-phase connections.

Pakistan’s power sector had accumulated more than Rs2.6 trillion (about $9.3 billion) in circular debt as of mid-2025, driven largely by distribution losses, electricity theft and weak bill recovery, according to official data. The latest reform is intended to attract local and international investors to install, maintain and operate the infrastructure, thereby advancing Pakistan’s digital transformation in the power sector, according to the Pakistani information ministry.

“The reform seeks to replace legacy systems with modern infrastructure, thereby enhancing transparency, operational efficiency, and long-term financial viability,” the information ministry said in a statement.

Advanced smart-metering infrastructure forms the cornerstone of this transformation, according to the statement. Smart meters provide real-time visibility of energy consumption, reduce theft through anomaly detection, improve billing accuracy and recovery rates, and eliminate manual errors by minimizing human intervention.

“All distribution companies have been directed to install smart meters for every new electricity connection, with no traditional meters to be issued to new applicants,” the information ministry said.

“In addition, all existing three-phase consumer meters must be converted to smart meters by a defined deadline, ensuring that commercial and industrial consumers are fully integrated into the digital system within the specified timeframe.”

Earlier this year, Pakistan appointed financial advisers and launched sell-side due diligence for the privatization of five electricity distribution companies, marking a long-awaited step in power-sector reforms tied to International Monetary Fund (IMF) and World Bank programs.

The five companies included Islamabad Electric Supply Company (IESCO), Faisalabad Electric Supply Company (FESCO), Gujranwala Electric Power Company (GEPCO), Hyderabad Electric Supply Company (HESCO) and Sukkur Electric Power Company (SEPCO), which provided electricity to tens of millions of customers and had long been a major source of financial losses for the state.

“The objective is to reduce losses, improve efficiency and limit the government’s fiscal exposure by transferring electricity distribution operations to the private sector,” read official documents shared with media in Jan.

Power-sector reform is a central pillar of Pakistan’s IMF bailout program, under which Islamabad has committed to restructuring state-owned enterprises, improving governance and reducing budgetary support. The World Bank has also linked future energy-sector financing to progress on structural reforms.

Two utilities, the Quetta Electric Supply Company and Tribal Areas Electric Supply Company, were excluded from the current privatization phase due to security and structural constraints, the documents said.