The much talked about privatization of the
state-owned Karachi Electricity Supply Corporation (KESC) is scheduled
to take place on November 27, 2004. Prior to the final bidding, a
pre-bidding exercise will be held on October 7, 2004. The three
short-listed buyers will offer the initial price on that occasion to
enter into the final phase of the deal.
The three short listed buyers are Qanoos Group of
Saudi Arabia, International Power Company (IPC) of UK and Hassan
Associates representatives of a Malaysian Power Company will
participate. The KESC has already completed the diligence exercise with
all the three intended buyers, which includes inspection of the entire
network including power generation, transmission and the distribution
system of the utility company.
It is for the first time that all the three intended
buyers were showing their keen interest in striking the deal with the
privatization commission for the purchase of KESC. The corporation
enjoys a monopoly over a huge market of electricity consumers estimated
to over 1.8 billion which makes it a gold mine with an annual yield of
about Rs40 billion revenue despite a bad patch of huge losses on account
of power theft running in billions of rupees.
It may be recalled that the KESC was facing 41
percent transmission and distribution losses out of its system (mainly
on account of power theft). Those huge line losses have now been reduced
to 37 percent by the present management led by Brig. Tariq Sadduzai
during last two-three years.
The preventive measures taken by the present
management against power theft have helped improving revenue by plugging
the leakage. These measures include installation of meters from inside
to out side the premises of the consumers, replacement of naked copper
wires with insulated lead from electricity poles to the consumers place,
and various other scanning devices to check the power thefts.
Actually it was the power theft at a such a massive
scale in KESC as well as WAPDA systems which is the one of the major
reasons for making electricity an expensive commodity in Pakistan. Had
this huge incidence of power theft brought down to International
Standards of 8-12 percent, it may add additional revenue to the tune of
Rs12-15 billion to the KESC. The current power prices were obviously
determined keeping in view to over the losses which is a logical
The large number of unbilled electricity consumers
causing 37 percent losses to KESC was an added attraction for the
potential buyers of the corporation, said Brig. Tariq Sadduzai while
replying to a question in a recent press briefing. They intended buyers,
he said were satisfied with the gradual reduction in the line losses
which continues to shrink due to preventive and protective measures
taken by the present management. Obviously they must have in their mind
more effective modalities to plug the leakage in the system.
The privatization of the KESC was sure to improve its
efficiency and quality of supply. However, the fact remains that it will
be monopoly of a single company over a huge market of over 2 million
consumers in the city.
In my opinion, instead of handing over charge to a
single company, it will be highly advisable that the KESC should be
divided into four companies to develop an environment of healthy
competition among the four power companies. It is the competition in the
telecommunication sector, which has brought a revolution in the life of
telephone subscribers. That successful experiment should be applied in
the privatization of the power sector as well.
Realizing the excessive power rates especially in
Karachi, the government has announced a relief package to the
electricity consumers with a relief of paisa 10 per unit for the
domestic consumers, Paisa 25 for industrial consumers and Paisa 15 for
commercial consumers. This relief will be available to the consumers
having power consumption more than 50 units in a month. The total
financial impact of the relief is estimated at about one billion rupees
on KESC revenues.
Announcing the relief package, Liaqat Jatoi, the
Federal Minister for Water and Power said that he was aware of the fact
that electricity charges are on the higher side in Pakistan, which needs
rationalization. He was hopeful of getting further relief in the
taxation over power consumption as the case is under consideration of
the Prime Minister.
Besides relief in tariffs, an attractive package was
also announced to speed up the recovery of the stuck up electricity
bills recoverable from the inactive consumers with disconnected
Under the relief package 50 percent remission of the
defaulted amount has been given to those inactive consumers who owe KESC
dues for the last 5 years.
A 25 percent remission to the defaulted amount for
3-5 years, 20 per cent off to the defaulters of 1-3 years and a 15
percent remission to the defaulters from six month to one year.
It is expected that as a result of these incentives a
major defaulted amount estimated to the tune of Rs21 is likely to be
recovered. While the active consumers whose supply was not disconnected
will be eligible for a 25 percent remission of the total defaulted
amount provided they clear the default in 12 installments on monthly