By AMANULLAH BASHAR
Oct 02 - Oct 08, 2000
Heavy line losses, massive power theft (approximately
60 per cent) and unprecedented rise in furnace oil prices altogether
have put the Karachi Electric Supply Corporation in a situation where it
is burning candle from both ends and suffering a loss of around Rs2.5
billion every month.
Practically speaking, it may not be possible for any
power company to serve or survive if the above situation allowed
prevailing unless remedial steps are not taken immediately. The recent
petition filed by KESC with NEPRA seeking a 15 per cent increase in its
tariff and a massive crack down launched by the KESC against power theft
are the steps to help out the organization from the financial mess. The
Karachi Electric Supply Corporation (KESC) has filed a petition with the
National Electric Power Regulatory Authority (NEPRA) seeking an increase
of 15 per cent in the power charges from November.
The KESC, in fact, has requested for an overall 32.7
per cent increase in power rates from November towards the end of year
2002. The KESC has pleaded in its request that it is not possible to
sustain in the face of ever-growing fuel cost and huge deficit the KESC
The increase in tariff has to be implemented in
phases by the end of 2002. The petition says that an increase of 63.3
per cent has been effected in the furnace oil prices which runs the
generators mostly based on thermal technology. The prices of gas, which
is another source for power generation, have also been increased by 23.9
per cent in the same period.
At the present rate of power supply, the KESC is
incurring heavy and unsustainable losses; hence the increase is
imperative for running the system. It is also pleaded that downswing of
rupee against dollar has also burdened the furnace oil prices which is
an additional cost paid by KESC for power generation.
In order to shed this unbearable load, the government
has been requested to allow a fuel adjustment under a new formula, pay
subsidy to KESC and allow the company to adjust its rates in a manner
that the consumers are made to pay the additional cost of generation and
WAPDA, it may be mentioned has already been allowed
an increase of 13 paisa per unit to raise its revenues by Rs3 billion
Currently, the KESC is struggling to survive with an
overall deficit of around Rs68 billion, says a report.
Brig. Syed Shahid Mukhtar Shah, who is leading the
KESC management agrees that increase in power tariff may not be
required, unfortunately the theft culture is so deeply rooted among all
segments of the consumers which cannot be weeded out in one go. The
survey and combing of electricity connections is however going on
seriously throughout the city for an effective check on power theft
cases. He feels that majority of industrial consumers are giving a
positive response to the combing operations, while the black sheep would
be track down in a systematic manner.
While going for combing operations it is necessary
for the KESC management to look out for those moles within its own fold
who are instrumental in facilitating the theft. Power theft costing
Rs2.50 billion per month cannot take place on such a massive scale
without the connivance of KESC's own staff. A massive combing operation
against the corrupt irrespective to the status and rank of the employees
within the KESC seems to be a pre-requisite to make combing drive a
success. Putting the house in order first may also help winning the
overall support from the masses instead of going for the unpopular
decision of increasing the tariff.
A survey conducted by PAGE in all categories
of end users including manufacturing, commercial and domestic consumers
indicates that people in general find it hard to co-exist with the
existing power tariffs. They feel that one of the major reasons for such
a massive power theft is unaffordable power tariff. The consumers
expressed their apprehensions that any increase in tariff may also
increase theft average.
The industrial consumers have welcomed the
government's decision to exempt all industries from payment of sales tax
on import of electric generating sets of 250kva and above. It was a long
standing demand of the manufacturing sector. The notification issued by
the CBR on Sept 28 says that only registered manufacturers can import
these generators for use in the process of manufacturing of taxable
goods. The decision has been widely welcomed by the industry as they
were feeling uncomfortable with irregular supplies due to break downs
and inflated bills.
It is unfortunate that despite having a monopoly,
which is considered as an ideal situation for selling any commodity in
the market, the rampant corruption over the years has eroded the system
to such an extent that instead of becoming a profit making entity, KESC
is suffering huge losses.
In order to get rid of the situation, privatization
of this public sector entity is another option before the government.
Earlier the government had put KESC on the list of privatization and had
appointed UBS as its financial consultants for carrying out financial
restructuring before changing the hands. That effort of the previous
government's could not produce any result. Now the present government
has again decided to sell it out and yet another financial consultants
The Muslim Commercial Bank (MCB) has also agreed to
provide a loan of Rs10 billion to the Karachi Electric Supply
Corporation (KESC) which is required to fulfil one of the Asian
Development Bank's conditions to release a $150 million tranche for the
power utility and the energy Sector Restructuring Programme.
It may be recalled that the government had signed a Memorandum of
Understanding with the Asian Development Bank to provide $225 million
for the financial re-structuring of KESC. The agreement signed on May 2
provides for the KESC to commit itself to rise the tariff by 25 per cent
within three years. The availability of Rs.10 billion from MCB and
meeting other conditions including a phased increased of 25 per cent in
tariff may enable the government to get the first tranche of $150
million shortly, sources said. The ADB had asked the government of
Pakistan to guarantee the provision of a financing facility to KESC to
meet its cumulative cash shortfall from July 1999 to June 2003.