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CREATING A CORPORATE CULTURE IN THE KESC

  1. KESC
  2. CREATING A CORPORATE CULTURE IN THE KESC

An interview with Brig. Syed Shahid Mukhtar Shah, MD-KESC

By AMANULLAH BASHAR
Oct 02 - Oct 08, 2000

Despite the formidable problems cropped up over the years due to mismanagement and rampant corruption in the Karachi Electric Supply Corporation (KESC), the present management has accepted the challenge of taking the organization out of the troubled waters.

Brigadier Syed Shahid Mukhtar Shah, Managing Director of the KESC, while pointing out the major issues which needed to be addressed on priority basis, said that the company is suffering a loss of Rs2.50 billion per month on account of power theft. The cost of power generation has also taken a quantum jump due to unusual increase in fuel oil, which has gone up from Rs6,127.12 per tonne to Rs11,179.75 today.

Brig. Shahid said although the concerted efforts made by the KESC has enabled the company to improve its receivables from Rs1.8 billion in July 1997 to Rs2.93 billion in 2000 yet there is still a large room for improvement.

Against the current level of receivables, KESC is spending Rs3.25 billion on power purchase from external resources while the cost of fuel purchase is around Rs1.60 billion and losing Rs2.50 billion on account of non-billed power consumption.

Consultants

The Managing Director said in a firm tone that he is determined to clean the mess out of the KESC and to create a corporate culture with an aim to institutionalize the system.

He regretted that efforts were never made in this organization to run it like an institution. Even a former Police Chief ran the Corporation in the past. Highly unionized staff was another Grey area, which restricted the growth of this organization with a professional approach. Now the efforts are being made to put the house in order. For achieving the purpose, KESC has decided to appoint financial advisors and consultants for its financial restructuring. On the other hand the Privatization Commission is against preparing for the privatization 51 per cent shares of KESC. In order to make a clean slate before putting it on the sale, Privatization Commission is also appointing financial consultants for the KESC.

Brig. Shahid said that he is aimed at improving the things in such a manner that whether the corporation is privatized or not, the KESC should be treated as an institution in the years to come.

This widening gap between receivables and outflow leaves no option but to use an iron hand against the power thieves. KESC would have to improve its receivables to survive. We have to take up the monthly billing at least up to Rs4 billion a month to reach a break-even position, said the KESC chief.

When asked to comment on, what people generally called, worsening of the situation instead of any improvement in KESC since the taking over by Army one and half year back? The KESC chief observed that the widespread culture of power theft, and rampant corruption was so deeply rooted that only a magic wand could overcome the problem overnight. A few army officers cannot combat the corruption spread over every nook and corner. Describing the details of massive power theft in Karachi, he said that houses mostly in posh areas were getting a higher price which have an underground illegal connection by-passing the electric meter of the KESC. Before buying the house the buyers asks whether the house he intended to purchase was equipped with a by-pass cable or not?

In many cases, the meter indicates a consumption of only 10 units of power in a month. The aim of the present combing survey being conducted by the KESC and Army teams is to spot all such willing power thieves.

When his attention was invited towards the fact that power theft on such a massive scale cannot be carried out with cooperation of the KESC, Brig. Shahid admitted that he was not defending or ruling out existence of the corrupt elements in KESC, but the action against them requires some evidence and proof. People generally complain about the corruption of KESC staff but no body dares to give the names in writing. How we can take action on verbal complaints. He said if people come with written complaints against the corruption irrespective of his status action would certainly be taken if the charges proved and the man involved in corruption was found guilty. He regretted that people are not fulfilling their social responsibility.

What practical steps are being taken by the KESC against the corruption and power theft, the KESC chief said that beside combing the suspected areas by KESC survey team, KESC has a plan to install meters on the PMTs of certain areas to ascertain how much power is being consumed by a certain block or area and what amount is paid collectively by the consumers of that certain block. A comparison between power consumed. The difference of power units consumed and the bill paid by the consumers will immediately expose the culprits.

He regretted that the instances of theft of HT conductors also assumed alarming proportions during the recent past. KESC was not in a position to patrol and guard the vast expanse of its transmission network. The copper conductors are stolen with the active connivance of the police and KESC staff. Such thefts in the Gharo-Dhabeji area have reportedly resulted in an ensuing water crisis in the city due to non-operation of the pumps in the region.

It may be mentioned that about 32 incidents of theft occurred in the jurisdiction of the police stations including Gulzar e Hijri, Korangi industrial area, Sachal, Mobina town, Zaman Town, Mangohpir, Bin Qasim, Dhabeji and Malir Cantt. As a result of these thefts KESC suffered a loss of around Rs11 million. During 1999-2000, 153,644 kg of copper conductor amount Rs36 million was also stolen, consequently bring a revenue loss of Rs12 million to KESC.

He said that meter reading was another problem area for KESC. It was difficult to cover 1.3 million consumers with limited readers. Hence a culture of average billing was found an easy way by the previous management in KESC. We are handling this area with strong arms. Average billing was a great source of inflated billing which created a nuisance for the genuine consumers." We are trying to bring the entire system on actual billing. The increased incidence of losses has come to light because of actual reading of the meters. In order to cover the average billing system, four zones of the KESC were privatized in the past and on the basis of their performance another zone i.e. Garden zone is also being handed over to the private sector. KESC desires to gradually privatize its entire zones for meter reading in future.

Brig. Shahid however said with a firm tone that gradually we would over the problem. More army officers would be inducted in other areas such as distribution, billing and administration to bring positive results.

Defaulters

The Managing Director while replying to a question said that a strong recovery drive has also been launched for recovery of Rs 18 billion against different defaulters. Giving a break-up of the held up amount, Brig. Shahid said that out of Rs18 billion an amount of Rs6 billion is a doubtful amount on various reasons, hence recovery of Rs6 billion may be treated under doubtful account. Out of the remaining amount of Rs12 billion, Rs2 billion are outstanding against various public sector entities. In order to recovery outstanding bills against Government department active efforts are underway and disconnection notices have been issued to these departments. He expressed the hope that in view of acute financial constraints faced by the KESC the amount held up against government departments would soon be recovered. Active correspondence with the federal and provincial governments is under process for recovery of Rs2 billion. A major portion of the remaining amount of Rs 10 billion against the private sector consumers rotates in a cycle of recovery and consumption of power. Efforts are however being made to narrow down the margin of the outstanding amount.

The company has to pay the fuel cost is in the region of Rs1.5 billion while the cost of power purchase from external resources comes to Rs3.25 billion.

In order to beat the cost-pushing factor i.e. ever increasing furnace oil prices compelling to raise the power tariff, the KESC engineers have facilitated 5-6 power-generating units with provision of running them on gas system when required.

However, the generating system cannot be switched over from oil to gas due to limited quota of gas allocation. Currently, KESC has a quota of 70 mmcfd, which is likely to be enhanced up to 100-110 mmcfd subject to availability of gas with Sui Southern Gas Company (SSGC). Another constraint in switching over from oil to gas is the formula for gas pricing which has yet to be decided by the government. The cost of power generation will however be much cheaper when we shift our system from oil to gas. Roughly speaking it may reduce cost of production at least to the half of the current cost, said the KESC chief.

Resources

KESC system is augmented from external resources which include IPPs (Tapal Energy 124.5 MW—Gul Ahmed 127.5 MW) Pakistan Steel 10 MW, KANUPP which providing around 74MW against its installed capacity of 125MW and WAPDA providing up to 1000MW as required basis, besides its own system having an installed capacity of 1756 MW.

The demand and supply of power forecast indicates that there will be an additional requirement of more than 1000 Megawatt (MW) in the KESC system by the year 2005.

Presently, the interconnection between WAPDA & KESC can cater for up to a maximum of 750 MW. Another 1200 MW from HUBCO can further augment this, if it is decided at any stage to connect it directly to KESC system. The estimated cost of such a project is likely to about $25 million. Hence, Karachi faces no immediate threat of power shortage in the near future.

Presently KESC has a total installed capacity of 1756 MW. Of the total installed capacity Bin Qasim Power Plant has a generation capacity of 1260 MW and its actual out put at present is around 840 MW. Another unit i.e. Korangi Power Plant has an installed capacity of 316 MW out of which the actual output is 220MW. SITE Gas Turbine Power Plant has a capacity of generating 100 MW its out put is 70MW Korangi Gas Turbine Power Plant has the capacity of 80 MW which is contributing 70MW in to KESC system.

Power Purchase

Brig. Shahid said that in order to cater to the consumers, KESC purchasing power from two IPPs i.e. Gul Ahmed and Tapal Energy at the rate of Rs3.17 per unit while WAPDA is providing at a cheaper rate i.e. Rs3.9 per unit. When asked how much power KESC is buying from the two IPPs, he said that under the contractual obligation 60 per cent of their capacity has to purchase while the volume of purchase increases in accordance with the demand.

The KESC chief said with a sense of satisfaction that so far there is no shortage of power within the licensed area of KESC and hence there is no load-shedding in KESC area. The occasional incidents of break down are mainly due to overloaded distribution system especially by illegal kundas. He also disclosed that survey of the industrial areas in Karachi is also under way and the KESC is in the process of regularization of the load of the industrial units in accordance with their actual requirement. Brig. Shahid also acknowledge the cooperation extended by the majority of the industrial consumers in carrying out the combing survey against the power theft.

Brig. Syed Shahid Mukhtar Shah, Managing Director, KESC

Born at Karachi, Brig. Shahid acquired early education from Government Senior Model School, PECHS, from where he passed Matriculation in 1965, obtained Intermediate education in pre-engineering from D.J. Government Science College in 1967 and graduated in Engineering from N.E.D. College in 1971. He was commissioned in the Corps of Electrical and Mechanical Engineering Pakistan Army in April 1972. He is also a graduate of Command and Staff College, Quetta and obtained Masters degree in Mechanical Engineering from Ohio University, USA in 1992.

He was an Instructor at Army School of Logistics, Murree. Served on secondment in United Arab Emirates (UAE), and Ministry of Defence, besides various other Command and Staff appointments.

Before his present assignment, Brig. Syed Shahid Mukhtar Shah, was Commandant, College of Electrical & Mechanical Engineers, Rawalpindi, where he served for over 51/2 years.

Brig. Shahid is a keen sportsman and was awarded NED College colour for representing the college in Cricket, Hockey, and Football and also captained the Karachi University Hockey Team in 1971.

Price increase of furnace oil

Year

Date

Base rate
(Rs/M. Ton)

15% GST
(Rs/M. Ton)

Total

1994

19-Jan

2,525.49

-

2,525.49

1995

26-Feb

2,525.49

-

2,525.49

14-Jun

2,678.74

-

2,678.74

28-Oct

2,926.39

-

2,926.39

1996

12-Feb

3,054.39

-

3,054.39

14-Mar

2,821.39

-

2,821.39

14-Apr

3,371.39

-

3,371.39

23-May

4,745.80

-

4,745.80

12-Jun

4,339.50

-

4,339.50

21-Jul

4,059.59

-

4,059.59

19-Aug

4,159.12

-

4,159.12

12-Sep

4,406.13

-

4,406.13

7-Oct

4,766.13

-

4,766.13

22-Oct

5,697.83

-

5,697.83

13-Nov

6,126.79

-

6,126.79

5-Dec

6,496.08

-

6,496.08

1997

4-Feb

6,127.12

-

6,127.12

18-Aug

6,159.37

-

6,159.37

1998

22-Jun

5,362.67

-

5,362.67

1999

19-May

5,874.09

-

5,874.09

16-Aug

5,874.09

881.11

6,755.20

23-Sep

6,006.18

900.93

6,907.11

11-Dec

7,220.68

1,083.10

8,303.78

2000

15-Feb

8,331.44

1,249.71

9,581.15

20-Mar

8,760.66

1,314.10

10,074.76

5-May

9,655.18

1,448.28

11,103.46

12-Jul

9,832.83

1,474.92

11,307.75

21-Jul

9,885.65

1,482.85

 
 

Tpt Ch 25.00

3.75

11,397.25

25-Aug

8,923.48

1,338.52

 
 

Tpt Ch 25.00

3.75

10,290.75

27-Sept

   

12,493.75