Leading Issues in the Economy of Pakistan: Agenda for Reforms The application of these criteria to a sample of SOE’s reveals the following: CASE FOR PRIVATIZATION OF A SAMPLE OF SOEs YES Score NO Pakistan Steel Mill 8.5 Pakistan State Oil National Shipping Corporation 8.0 Sui Southern Gas Company National Investment Trust 8.0 Sui Northern Gas Ltd. SME Bank 7.5 Heavy Electrical Complex 7.5 Pakistan Railway State Life Insurance Corporation 7.5 National Power Construction Company 7.5 Pakistan Reinsurance Company 7.0 Pakistan International Airlines 7.0 TOTAL 9 TOTAL Source: MOF Score 4.0 3.5 3.5 2.5 4 Even with this limited exercise, 9 SOEs qualify to be considered for Privatization. Management of the Power Sector: The power sector has truly emerged as the‘black hole’ of the national economy. It received a subsidy of Rs 1100 billion in 2021-22 and the Government had to cover contingent liabilities of the sector of Rs 330 billion. In addition, fuel costs have increased enormously, and the Fuel Adjustment Charge reached the peak level of Rs 9.90 per kwh, which led to a phenomenal percentage increase in bills especially of small consumers. Further, transmission, distribution and billing losses remain very high by international standards. The level of circular debt has reached Rs 2.7 trillion. Moreover, despite adequate generation capacity there continues to be power loadshedding, because of shortages of fuel. The time has come for taking major decisions about the future structure and management of the power sector. The following options may be explored. i) Privatization of DISCOs. The experience with K-Electric needs to be reviewed. ii) Provincialization of DISCOs. iii) Handing back power distribution to WAPDA as was the case up the mid-90’s, which will also facilitate power sector vertical integration. 16.7 Better Debt Management The primary problem relates to the policy on and management of domestic debt. External debt inflows are primarily determined by donors and lending agencies. Given problems of 170