Pakistan charges a household in Faisalabad and a household in Quetta broadly the same notified rate for a unit of grid electricity, even though the companies serving them could hardly be further apart. That arrangement, the uniform tariff, has rarely been questioned in public. In early October 2026 the International Monetary Fund questioned it directly. During the current review talks, according to reporting on 3 October, the Fund asked whether the uniform tariff would continue once distribution companies are privatised, and Pakistani officials did not give a clear answer. The question deserves one, because the answer decides whether privatisation reduces the fiscal cost of the power sector or simply moves it onto a new set of contracts.
How the uniform tariff works
The mechanics are worth setting out. The IMF's April 2026 staff report on the third review of the Extended Fund Facility describes the process. During annual rebasing, which has moved from July to January, NEPRA determines an overall sectoral revenue requirement and a uniform weighted average tariff consistent with cost recovery, based on DISCO cost forecasts and its own assumptions. The government then notifies base tariffs for each consumer category, including a tariff differential subsidy and its policy choices on protected consumers. Quarterly tariff adjustments, monthly fuel charge adjustments, a debt service surcharge and federal taxes sit on top. The gap between what each company's costs justify and what its consumers are actually charged is closed by subsidy, and by cross-subsidy between consumer groups.
A Power Division motion filed with NEPRA in February 2026 shows how firmly that design is embedded. It sought a revised government applicable uniform tariff within an already budgeted tariff differential subsidy of Rs249 billion, and it restated the policy position that the government may maintain a uniform consumer-end tariff for K-Electric and the state-owned distribution companies, even after privatisation, through direct or indirect subsidies. On paper, then, the uniform tariff has been written in as a feature that is meant to survive the sale of the companies.
The spread it papers over
The trouble is the spread in performance it is asked to paper over. Data the energy minister submitted to the National Assembly, reported by Profit on 22 August 2026, put aggregate DISCO losses at 17.2 per cent in FY2025-26. Behind that average, QESCO's loss ratio was 60.2 per cent, up from 38.4 per cent the year before, and PESCO's was 40.7 per cent. SEPCO stood at 38.5 per cent. At the other end, IESCO reported 7.9 per cent, FESCO 8 per cent and GEPCO 10 per cent. In money terms, the same data show QESCO's losses rising to Rs82 billion and PESCO's at Rs85 billion, while FESCO's fell to Rs1 billion and IESCO's to Rs2 billion. A single national price laid across those numbers means that consumers of the better-run companies, and the federal budget, are carrying the networks where most of the electricity is lost or never paid for.
Privatisation changes who owns that problem but not, by itself, who pays for it. Buyers will naturally be most interested in the better-run companies. If an investor acquires one of them and is still bound to charge the uniform rate, its revenue will depend on a regulated tariff that the government sets with weaker companies in mind, plus whatever subsidy flows are agreed. If the weakest companies stay in public hands, or are restructured later, the subsidy cost of the uniform tariff becomes concentrated exactly where losses are highest. Neither outcome removes the fiscal burden. The October reporting makes this point plainly: retaining a uniform tariff can require the government to keep subsidising consumers served by higher-cost distribution companies.
The K-Electric precedent
K-Electric is the precedent everyone in the sector already knows. The company has long been in private hands, yet its consumers still face the national uniform tariff, with the difference settled through federal subsidy claims. That settlement has become one of the most persistent sources of dispute in the power chain. The October reporting describes K-Electric delaying payments for electricity bought from the federal system amid disagreements over tariffs and subsidy claims, and the federal government being prepared to clear more than Rs100 billion of K-Electric's claims, subject to resolution of tariff issues. It also notes that NEPRA and the NEPRA Appellate Tribunal rejected K-Electric's request for a Rs40 per unit tariff and approved Rs32.37 per unit, a decision the government expects to be challenged in court. That is what a uniform tariff looks like after privatisation: a standing negotiation between a private utility and the federal treasury over who owes whom.
The same review round shows how those disputes feed directly into circular debt. Power Division officials told the Fund, according to reporting on 3 October, that power-sector circular debt rose by Rs61 billion in FY2025-26 to Rs1.675 trillion at the end of June 2026, and attributed the increase to lower budgeted subsidies and the payment dispute with K-Electric. Separate coverage of the talks reported that officials described recoveries and line-loss reduction as ahead of IMF targets, while around Rs95 billion less had been released under the tariff differential subsidy head. The lesson is uncomfortable. When subsidy funding falls short of what the uniform tariff requires, the unfunded gap does not disappear. It returns as arrears.
Provincial arrears add a second layer of the same problem. The government told the IMF it had agreed a mechanism between the Power and Finance divisions to recover more than Rs110 billion in reconciled provincial electricity dues by deducting them from provincial shares under the National Finance Commission award, with around Rs50 billion expected in the near term. Whether provinces will give written consent and debit authority to the State Bank is unclear. Reporting notes that Khyber Pakhtunkhwa previously declined such authority for a separate deduction. The Fund, for its part, worried about the strain on provincial budgets that are already expected to deliver a Rs1.7 trillion cash surplus. Smart meters for provincial connections are being installed to settle billing disputes. All of this matters for the tariff debate, because unpaid public-sector bills weigh on DISCO revenue. A buyer pricing a DISCO will want to know whether those dues will be paid on time, or recovered through a federal deduction that the provinces contest.
There are only a few honest ways forward. The first is to keep the uniform tariff and fund it fully and transparently, with an explicit subsidy line for each company published in advance, so buyers and lenders can see the support they depend on. This keeps the politics of equal pricing but removes the pretence that the cost is zero. The second is to move gradually towards company-specific tariffs that reflect each network's allowed costs and loss targets, with direct support for vulnerable households in high-cost regions delivered outside the tariff. Pakistan has already committed, in its programme with the IMF, to replace untargeted residential subsidies with support routed through BISP from January 2027. A targeted transfer of that kind is a more natural home for regional equity than a nationally averaged price. The third is a hybrid, in which a uniform tariff applies to protected household slabs while commercial and industrial tariffs move closer to each company's cost of service.
The honest options
Each option has costs. Company-specific tariffs would raise bills in regions where incomes are lower and where unpaid bills are already a law-and-order problem as much as a commercial one. Full, transparent funding would expose the size of the transfer to the weakest networks every year in the budget. The hybrid would require NEPRA to run two pricing logics at once. But the status quo has a cost too, and October's numbers show what it is: a circular debt stock that rose when subsidy releases were cut, a privatised utility locked in a subsidy dispute with the state, and provincial arrears that the centre can only recover by reaching into provincial revenue.
The industrial package adds a reminder that pricing decisions are not static. The incremental tariff of Rs22.96 per unit for eligible industry, introduced in December 2025, was due for review after six months and was still pending nine months later, with a hearing scheduled for 5 October. Whichever way that hearing goes, it shows that the government already uses differentiated prices when it wants to change consumer behaviour. The question the IMF raised is whether the same willingness will be applied to regional costs before, rather than after, the DISCOs change hands.
Bidders will price that uncertainty either way. A clear answer now, written into the sale documents and the tariff methodology, will cost less than a K-Electric style dispute discovered ten years later.