KESC'S PRE-TAX PROFIT INCREASES 1037 PER CENT!
Otherwise, it is 'business as usual'
By SHABBIR H. KAZMIThe Karachi Electric Supply Corporation was established in 1913 and is listed at Karachi Stock Exchange having a paid-up capital of over Rs. 1,620 million and reserves exceeding Rs. 5,893 million. Presently most of its shares (85.55%) are owned by the financial institutions, investment companies and insurance companies.
Jul 06 - 12, 1996
It has announced in its half yearly report (July-December '95) a record pre-tax profit in excess of Rs. 654 million as compared to over Rs. 57 million for the corresponding six months of 1994. The profit was classified even higher than the annual pre-tax profit earned by the Corporation during the last 10 years.
However, the interesting points to note are, the total kwh units sold registered an increase of only 2.53%, the gross revenue registered 33% increase but profit before tax showed a colossal increase of 1037%. Whereas, the cost of sales were increased by 22.6%. In the absence of 'notes to accounts' it appears more like a manipulation of figures.
According to reports, the two state-owned utilities namely WAPDA and KESC owe more than Rs. 1.25 billion to the Sui Southern Gas Company (SSGC). Although WAPDA has clarified its position and also claimed of having made payments of Rs. 3,325 million to the gas company the situation needs serious probe. According to sources privy to WAPDA, the way WAPDA bills are settled by the federal government remains debatable. According to the sources, the federation deducts the amount payable to WAPDA from the payments made and offsets it against gas charge
This is important specially against the backdrop of a scenario in which very shortly WAPDA would be buying electricity from private power plants. HUBCO has already energized its first generator and the supply was temporarily disturbed by the fire which broke out in June.
Similarly, KESC has also entered into bulk power purchase agreements with 5 private power plants for 1,305 MW and negotiations with another 3 companies for the supply of 295 MW are underway. Both these utilities owe millions to Pakistan State Oil for the supply of furnace oil and other POL products. The question is, if these two companies are not able to settle their bills for the fuel they buy, how would they settle the bills of electricity which they would buy from the private power plants?
It has been said that KESC has mainly defaulted because lately it has undertaken various developmental programmes. This includes system rehabilitation plan for its transmission and distribution network and the situation has aggravated due to mounting receivables and constant increase in T & D losses and reduction in dependable power generation capacity.
At present, KESC faces many problems. On top of the list is the declining efficiency of installed power generation capacity which has remained static at 1,738 MW for the last many years whereas the dependable capacity has gone down to 1,229 MW, thereby leaving KESC capable of meeting only 80% of the total demand of electricity. For the balance requirement it is dependent on KANUPP, WAPDA and Pakistan Steel Mills. Supplies from KANUPP and WAPDA are often disturbed resulting in load-shedding in Karachi. The KESC sources say that once the 210 MW unit number 6 at Bin Qasim commences power generation, the situation is likely to improve.
The second and more serious problem is the outdated and heavily overloaded T & D network. The delays in sanction of new connections, law and order situation in the city and limited availability of funds has nurtured the 'kunda mafia'. This is the reason the T & D losses have gone beyound 30% of the total electricity produced by the Corporation.
Although the chairman is reluctant to accept the fact, is it not true that 'kundas' are working in connivance with the line staff of KESC. Also, what the KESC management is never willing to talk about is the supply of electricity to industrial units without an official connection and tampered meters. It is a fact that KESC has remained ineffective due to 'other considerations'.
The third problem, which has inflicted liquidity crunch on the Corporation is very high amount of receivables which has crossed the Rs. 6 billion figure. The total amount of trade debt had increased from slightly more than Rs. 4,511 million in 1994 to over Rs. 5,685 million. The major defaulters are the federal government, the provincial government, KDA, KW&SB and KMC.
While the Corporation has a total paid-up capital of over Rs. 1,620 million, the level of outstanding amount indicates criminal negligence on the part of the Corporation, the federal and provincial administrations and a weak legal system in the country which does not allow even the stateowned corporations to recover their own money.
The vicious circle forces KESC and WAPDA to borrow more at higher rate of interest, withhold payments of PSO and SSGC and increase the tariff for consumers. But is there a limit?