Nov 03 - 09, 2008

People have started loosing their patience and resorting to violent demonstrations on the streets. The phenomenon is not confined to few cities but spreading to nook and corner. Not only that people have to endure long hours of load shedding but tariff hikes announced with regular intervals are simply out of proportion and unjustified. Crude oil prices have reduced to half of its peak of $147 per barrel but no benefit has been transferred to the general public. The government uses petroleum gas and development levies to bridge budget deficit.

Pakistan's energy sector is once again suffering from mounting 'circular debt'. This has reduced oil inventories with power generation companies to alarmingly low levels, often leading to interruption in power generation. Mounting debt is also causing liquidity crunch for oil marketing companies, refineries and E&P companies. In order to meet their cash requirement these entities are forced to borrow more, which adds to their financial cost.

The Karachi Electric Supply Company (KESC) and Discos suffer from some identical issues, which are huge receivables, massive power theft, inefficiencies and mismanagement. In order to bridge the growing cash requirement, electricity distribution companies keep on increasing electricity tariff, which further proliferates theft and delays in payment by the consumer. One of the reasons for poor recovery is non-payment by some of the entities, which fall under the category of 'essential services'. Electricity distribution companies just cannot disconnect supply and the outstanding amounts keeps on mounting. At times deduction at source has been proposed but the decision cannot be implemented due to intervention/resistance by the administrative authorities.

It is feared that if the situation, prolonged hours of load shedding, continues the intensity of violent demonstration may cause serious law and order situation. Though, the reasons for the pathetic prevailing situation are known to those who matter but one cannot resist from waking up the sleeping watchdogs and policy planners.

Since new management has taken over management control of KESC, which has also expressed its commitment to resolve the load shedding issue, it is necessary to reiterate that the management cannot resolve the issues alone. It needs support from the government as well as all other stakeholders. It may be true that government and semi government entities cannot clear outstanding amounts in one go. However, the KESC and these entities should sit together to work out a plan to ensure recovery of outstanding amounts.

Temporary connections and 'Kundas' should be immediately converted into regular connections after determining the actual load of all such consumers. Some of the self-proclaimed experts say that regularization of all such connection is not possible because the KESC does not have funds to install meters. However, this is the lamest excuse because unless cash flow is improved injection of billions of rupees would be meaningless and counter productive.

However, to facilitate this move transmission and distribution network has to be revamped. This means upgrading of pole mounted transformers and substations. In most of the areas actual load of consumers has grown double the size of connected load. The situation is most obvious in posh localities and drawing to load much higher than the sanctioned load puts heavy burden on the T&D network and causes many other related problems i.e. frequent tripping of the system, bursting of PMTs etc.

In the past an effort was made to monitor the number of units dispatched and billed from key grid stations. This has helped in determining the pilferage and regularization of the connections. This exercise should be undertaken more intensively to curb electricity pilferage. It is estimated that KESC still suffers from above 35% T&D loses, which should not be more than 15% for an integrated and compact transmission and distribution company. If the new management succeeds in brining down T&D loses to this level its cash flow would increase substantially and the new management needs not inject billions of rupees to keep the company fully operational.

The KESC does not need 'angles' to manage the company but the hardcore professionals. The workforce of KESC can be divided into two visible groups 'the hard workers' and 'the ghost workers. The policy of any prudent management should be to reward the hard workers and weed out the ghost workers. The new management of KESC should also follow this policy. It may not be wrong to say that most of the workers are efficient, hardworking and loyal to the corporate but some of the corrupt and inefficient executives must be immediately sent home rather than undertaking massive retrenchment in the company.

Over the years some of the inefficient and corrupt executives have been misleading the top KESC management on the subject of Kundas. In the past various exercises were initiated to remove Kundas but every time the target was low income localities. In fact, the largest percentage pertains to industrial units, commercial buildings and posh localities.

The new bread of power pilfers belong to various ethnic groups/localities. It is very difficult to remove these Kundas by force but other ways could be found that include providing regularizing connections. The tariff may be an issue. The real reason for growth of these connections over the last ten years has been refusal by the KESC management to give connection. The connections were denied on the ground that the load is not available with the KESC but these consumers are drawing load and bulk of the benefit is going to corrupt workers and executives.

One of the reasons for higher cost of electricity produced is that KESC's entire capacity is thermal based. Though, WAPDA produces substantial part of electricity from hydel plants but KESC does not benefit from this. In fact WAPDA should reduce the tariff being charged by 25% at least and in turn KESC should pass on this benefit to its small consumers.

It is also necessary to reiterate that electricity demand of areas coming under KESC exceeds 4000MW and whatever figures have been provided is grossly understated. The new management should get ready to ensure availability of 4000MW in phases but at sensible rate.