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1- KESC: THE KARACHIITES CAN MAKE THE DIFFERENCE
2- TAKAFUL
3- SNAGS IN PRIVATIZATION
4- AUTO MARKET EXPANSION
5- STIMULATING PRIVATE SECTOR INVESTMENT

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KESC: THE KARACHIITES CAN MAKE THE DIFFERENCE

 

Businessmen, industrialists should come forward to help pursue privatization process

 

By MUHAMMAD BASHIR CHAUDHRY
Sep 01 - 07, 2003
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The Karachiites have been suffering more breakdowns in electricity services since the first rain this season on 7th July, despite best efforts of the KESC staff and management, within their means, for maintaining regular supply in all areas. The Sindh Governor and the Chief Minister have held meetings with the heads of the utility companies, asking them to improve their respective services and to immediately attend to the consumer complaints. The City Nazim also had similar meetings, wherein the utility companies elaborated the steps they were taking for ameliorating the sufferings of the people. They also informed of their existing constraints technical and financial under which they were operating. The Karachiites as well as the provincial government want uninterrupted supply of electricity and are inclined to support remedial measure for improvement in KESC services and operations.

Privatization of KESC is now said to be a matter of a few months. The Karachiites hope that with privatization of the utility, quality of its services should improve considerably coupled with reduction in electricity tariff. This might happen if the privatisation process is properly structured and additional resources are infused for revamping the generation, transmission and distribution networks. At the same time, the Karachiites must also appreciate that the new investors would largely work to earn the envisaged rate of return to them, no matter if the electricity tariff or other charges were raised by KESC in the process. The Karachiites, particularly the businessmen and the industrialists, with a view to protect their interest, need to actively pursue how the privatisation is being structured by the government. The Karachiites have to scientifically examine all the allied issues and register their concerns on KESC operations with the government before the utility is actually privatized.

The proposals for improving KESC workings, coming from different consumer groups in Karachi, include: (a) Handing over the control of KESC to the Sindh government as presently it is controlled by the federal government and the Privatization Commission is actively pursuing its privatization; (b) Building two new power generation plants on fast track basis in order to meet the present shortfall in power supply. Many disruptions in power supply are said to be due to some problem with its link for receiving 400 MW-500 MW from Wapda; and (c) Joining KESC system with Hubco at Hub Choke for meeting the supply gap presently met from Wapda through Jam Shoro. There is presently no transmission line between Hubco and KESC for the purpose and its construction might take about two years. Moreover, Hubco presently has contract for supply of all electricity to Wapda. The arrangements might have to be first renegotiated and documented.

Other options for improving KESC conditions may include: (a) Private sector generating power for own industry in Karachi might sell extra power to KESC at mutually agreed price. This should help augment the capacity available to KESC and to that extent reduce load-shedding at costs that are not exorbitant. (b) KESC might offer the existing sites of now obsolete power generation plants within Karachi to the IPPs to install gas-based power plants on fast track and sell power to KESC; and (c) Privatization of KESC to be structured on the pattern of Wapda as against the present scheme of privatizing as an integrated utility. Distribution function can be privatized or leased out first to 5-10 private sector distribution companies, each company to have clearly marked out licensed area depending upon the number of existing grid stations allocated. Generation might be privatized in the second phase while transmission could be entrusted to NTDC in the public sector.

The proposals mentioned above reflect the need for concrete remedial actions to effectively tackle all problems confronting KESC and the Karachiites. However, when each proposal is subjected to the reality test at the experts' level, only then the full extent of the pre-requisites and problems associated with each proposal would become evident. Moreover, acting on these proposals may have implications some of which might not be fully acceptable or practicable. Perhaps the existing proposals may have to be modified and improved or new proposals added to the menu of options for rehabilitation of this electric utility. Moreover, financial, technical and managerial resources are needed to put any such proposal into practice once it is found suitable for implementation. In such circumstances, it is up to the resourceful Karachiites and the institutions such as the FPCCI, within the prevailing constraints, to take the leadership role for public good of ensuring regular power supply to the consumers at reasonable rates. The Karachiites/the institution might take up matters with the government as well as with the KESC management for bringing improvement in the working of the utility for ensuring reliable electric supply to the consumers at reasonable rates. It may be mentioned that within cosmopolitan Karachi there is urgent need to take similar positive initiatives for resolving problems of water, sanitation, sewerage, health, education etc. confronting the people.

It has been said that NEPRA sometime back has agreed to allow to KESC the Multi-Year-Tariff (MYT) which probably has opened the way for its early privatization. Chances are that increases in electricity tariff on account of increase in fuel price or other various factors including inflation might be provided for in the MYT. Thus, there is a possibility that the purported MYT tariff has implications for the consumers particularly industry in and around Karachi. The government might also be considering adding some sweeteners to the privatization menu for increasing attraction to the prospective investors.

The Karachiites might consider ascertaining the factual position on different aspects of KESC at present as well as after privatization, which is said to be around the corner now. The Karachiites have to know what is in store for them in the privatization of KESC. They might consider taking it up with the authorities if they find the MYT or other arrangement to be harsh or tilted more in favour of the prospective investors instead of the consumers.

 

 

The Karachiites, in coordination with the provincial government, might consider holding meetings and the conducting of seminars with a view to clarify things concerning KESC services and their costs in case it is privatized or it remains in the public sector for some more time. The Seminars might be addressed by the people from the Privatisation Commission, the World Bank, the ADB, NEPRA, PPIB, KESC/WAPDA, the IPPs, the FPCCI and its affiliates and the general public, especially experts who are working for the public good. Each institution or agency might be asked to define its views with respect to KESC and its proposed privatization and the impact of such actions on the consumers in Karachi. This should be more than a brain storming sessions to help develop the ways and means for improvement of KESC services to the consumers at reasonable rates, now as well as in future. It may be mentioned that electricity matters came under discussion in the two-day seminar organized by the Institutes of Electrical and Electronic Engineers Pakistan (IEEEP) last year. The Helpline Trust recently organized a talk on Power Crises in Karachi which was attended by KESC senior officers as well. Many points were raised some of which were clarified. KESC efforts for improvement in operations were also noted. More such seminars focusing on different aspects of KESC would be arranged timely before the utility is privatized. Perhaps, with a view to turn it into a modern electricity utility, consensus may emerge to the appointment of a Task Force for KESC rehabilitation and restructuring.

The proposals for improved electricity services through KESC to the consumers in Karachi cannot be deliberated properly in the absence of details, particularly information on financial, technical, contractual aspects, etc. of the stakeholders. The seminars as proposed above should provide the forum to know the reaction of the counterparties involved and to identify the areas where further action is required to make progress in the desired direction. The process started with sincerity of purpose is expected to incline the counterparties to positively respond to the public initiative. This process has the potential to bring all counterparties to a place for understanding the views and the proposed actions for resolving the problems of Karachi consumers as well as the KESC. Once these issues are satisfactorily resolved, and reliable electric power is assured at reasonable costs, it would be possible to harness the full potential of Karachi for the welfare of all.

The Karachiites have to also continue exhorting the KESC for taking steps to change the attitude of its management and staff toward the existing and the prospective consumers. A large number of KESC employees consider themselves as special and in their eyes the consumers who approach them for resolving their problems are considered a nuisance of some sort. This has to change and fast. KESC is a service provider and the seller of electricity and the consumers are customers. These employees need to be educated and properly motivated. KESC people have to learn to treat the consumers as valued customers and provide them timely service with a smile, the hallmark of the successful salesmen all over the world. To my thinking this is the pre-requisite for improving KESC services. Once the thinking is changed, it would pave the way for other matters to be sorted out to the satisfaction of the consumers as well as the utility.

The federal government has been supporting KESC operations by large cash injection for the last few years. Recently the government has allocated Rs 1.0 billion for revamping the electricity system in Karachi. The allocated amount, though small, can make a difference if utilized judiciously for revamp of the priority areas. KESC management has to vigorously continue its campaign for improving its workings. Line losses are the major problem and KESC management has to take revolutionary steps to overcome this menace. The tendency for illegal connections can be minimized by making the legal connection extra-easy for the consumers. KESC might consider providing temporary connections and the electricity meters to the consumers just by receiving an application for the purpose and by seeing the original Computerized National Identity Card (CNID) to verify the address and other particulars of the consumer. KESC staff may load the meters in a truck and go round the area collecting applications with the prescribed fee and installing the meters there and then. Campaigns of this type when carried out with proper publicity are expected to reduce pilferage of electricity and increase KESC income. General public and the consumers have also to desist from illegal practices in the use of electricity, if any.

KESC may continue taking measures for increasing efficiency and transparency in the dealings with the consumers. This should improve its image in the eyes of the consumers. KESC is urged to simplify the procedure and the actual work for change in classification of the consumers from one category to the other. There might be one consumer who is being billed as a commercial consumer whereas he may be a domestic consumer now, or vice versa. The general tendency in some of the consumers is that they would not like to change their status as consumer if they are presently paying less. But you never know if this arrangement is continuing with the connivance of a misguided employee of KESC. There may be other cases, where the consumers would be paying more at present and want the status to be changed to the actual use. There is possibility that the procedure has been made extra tight in such cases, ostensibly to earn some side income for the employees handling such changes. In both the cases, KESC is a loser at present. Another area for ease in procedure is the substitution of name of the present consumer in place of the old consumer who has sold out. These and similar other small matters could be easily resolved by changing the present strict procedures for the convenience of the consumers. This should allow increase in income of the utility and improve its image in the eyes of the investors as well as the consumers. KESC has to work hard and long to earn this position.