The government of UAE has offered 4 gas turbines,
each with a capacity of 60 mw as a friendly gesture to help overcoming
power problems in Pakistan.
President Musharraf, in order to provide relief to
the electricity starved Karachi, had advised that two of the turbines
will be given to the KESC while remaining two to be installed in WAPDA
system. Though the decision to provide two gas turbines to the KESC
was taken prior to the privatization of the KESC yet the commitment
will however be honored, informed sources told PAGE. This will be a
post privatization bonus to the new management Qanooz al-Watan, a
Saudi Group which will be managing KESC affairs in technical
collaboration with Siemens Pakistan.
Qanooz al-Watan, the successful bidders of the KESC,
have not yet submitted the agreed price i.e. over Rs19 billion and
according to informed sources will be depositing the amount on March
20 to take over the charge on March 24.
The official quarters especially from Privatization
Commission were however happy over the deal which according to them
would help improving the power supply situation in Karachi as it would
be mandatory for the new management to invest $400 million or Rs38
billion for the rehabilitation of transmission, distribution and
generation network of the KESC. Besides improved infrastructure of the
KESC, the government would also get a relief from huge subsidies it
had to make every year to keep the utility company in business. The
decision to privatize KESC would also bring relief to over 1.9 million
consumers from frequent power breakdowns, fluctuation and load
shedding which had become a routine matter due to poor transmission
and distribution network which has already come to the age.
The critics have however expressed their concerns
over the privatization of KESC, especially the industrial consumers,
who were of the view that the government has privatized the utility
company at a throw away price.
While substantiating their arguments, they pointed
out that it is obligatory to the government to invest a huge amount of
Rs13 billion for restructuring the infrastructure of the utility
company by the end of 2006. So far, the government has provided Rs3
billion on this rehabilitation program in the KESC while remaining
Rs10 billion will have to be made available by next year. The
government will be spending yet another amount of Rs3 billion for
carrying out the much desired project of direct link between HUBCO and
the KESC. If all these expenditures are taken into account what would
be the net gain as a result of this sell off? The critics asked.
Leaving aside the question of gain or loss incurred
to the government or the new management as an outcome of the
privatization of the KESC seems to be a valid concern disturbing a
large number of consumers who are in fact are the real stakeholders in
the whole scenario.
The exorbitant electricity prices have always been
a major concern of all sorts of industrial, commercial and domestic
consumers in Pakistan soon after the energy policy of 1994 which
linked the power price with the price of international fuel oil to
facilitate the Independent Power Producers under power purchase
Today, the situation is altogether different.
Instead of consuming costly fuel oil, the KESC system has been shifted
to the indigenized natural gas. It is unfortunate that despite a
drastic cut in fuel expenditures, there was no visible change in
electricity prices in the KESC system. It is said that huge
Transmission and distribution losses to the tune of 38 percent was the
real cause of inflated electricity. The government had to allow huge
budgetary allocations in the form subsidy to overcome T&D losses.
Obviously the government would get relieved of the subsidy burden
after the privatization of the KESC but the genuine consumers would
continue to suffer unless the government abolishes the Additional
Surcharge, one of the frightful levies imposed on power consumption in
the KESC system.
KESC (established on 13th September, 1913) has been
serving the people of Karachi for the past about 90 years. Probably,
however the worst part of the entire 90 years history of KESC started
after 1994 with the increase in power tariff studded with the indirect
taxes levied across the board irrespective to the financial status of
the consumers. The most formidable part of the indirect taxation
system is that it treats people at par without considering whether one
is a factory worker or a business tycoon. It was the exorbitant rate
of electricity which forced the people of low income group to use
KUNDA to escape from unbearable cost of electricity bills. Theft of
electricity in the KESC system is cited as one of the reasons for high
T& D losses. The present management has been making efforts to
control T&D losses and succeeded to reduce T&D losses from 42
to 38 percent by implementing stern administrative measures. However
the affordability of electricity prices was the key to this social
malaise for which the government will have to reduce some of its
levies on power consumption.