Brig. Tariq Sadduzai MD KESC foresees a win-win situation for all the stakeholders after privatization of KESC


Mar 21 - 27, 2005



The privatization process of Karachi Electric Supply Corporation (KESC) is now close to be accomplished soon after the payment of the agreed price (Rs20 billion) probably on March 20 by the successful bidders, the Qanooz al-Watan group of Saudi Arabia.

They will be free to take over the charge of the company after making the payment. The word about privatization of the KESC, which is an organization of the masses, had naturally generated a wave of questions and apprehensions regarding job security in the minds of around 20,000 people associated with the corporation besides perturbing minds of 1.9 million consumers due to their concerns for electricity charges which are already on the higher side.

There were several protest statements and demonstrations staged by the KESC employees to express their apprehensions regarding job security in the wake of privatization. They had also formed an action committee to press the government for their demands.

Similarly, the industrial, commercial and domestic consumers were also opposing the privatization of the KESC through various platforms to show their concerns for possible hike in electricity prices by the private owners in future.

In the backdrop of the situation, it was probably the most appropriate time to have a chat with Brig. Tariq Sadduzai, the outgoing Managing Director who stayed for about 4 years in KESC, to discuss the much talked about post privatization issues pertaining to the apprehensions of the consumers and the employees of the organization.

Brig. Tariq Sadduzai, an aeronautical engineer by profession and his team of other army professionals was assigned the job in 1999 to put the administrative, financial and operational system in order which was in a complete mess. The Transmission and Distribution losses had jumped to an alarming level of 42 percent mainly on account of power theft. It was the time when the government to inject a huge amount of Rs17 billion a year to make up the financial losses incurring every year into KESC system.



Though the human memory is short, but not too short to recall the days when the consumers had to run from pillar to post in a bid to obtain two-three installments of their inflated electricity bills. So much so the consumers had to offer bribe to the concerned officials to get installments of the bills or to restore power supply disconnected on non-payment or due to other reasons. The rampant corruption had consequently eroded the entire organizational structure of the utility. Due to financial constraints, the company was unable to provide meters to a large number of housing and commercial projects hence creating a situation which created a large crop of illegal consumers by making payments privately to the corrupt. Despite several attempts made by the governments in the past no private sector party was willing to buy such an organization full of all sorts of ills.

Today, the situation is altogether different from what it was four years back. The financial losses brown down from Rs17 billion to Rs6 billion this year and will further go down to a level of Rs3 billion next year paving the way to be a growing concern for the KESC in the days to come. No doubt it all happened due to concerted efforts of the present managerial team led by Brig. Sadduzai making KESC a classical case study in the corporate sector of the country. This tribute was paid by Akhtar Hayat, the Chief Instructor, Administrative Staff College Lahore when he, accompanied by a 50-member team of senior civil and army officials during a recent visit to KESC.

Coming back to the concerns of the KESC employees, Brig. Sadduzai observed that in effect the privatization has placed the workforce in a much better position as far as the job security or fringe benefits of the workers are concerned. The agreement with the private sector ensures that all contract employees would be entitled a 20 percent raise in their salaries. The new management has agreed to offer 10 percent shares to the employees while there is no question of retrenchment because they have to run the organization with these people. Actually, the present workforce was yet another assets for the new management especially in view of the administrative cost which merely 5 percent of the total revenues of the company, hence they are not a burden rather an assets of the company, instead of retrenchment they would go to reinforce the existing workforce, said MD KESC. Above all these incentives offered by the private management it has agreed to restore the Trade Union rights from the first day of taking over the charge that was a long standing demand of the KESC workers. It may be recalled that the government had put a ban on trade union activities through presidential orders in 1999.

As far as the apprehension for increase in tariff was concerned, the agreement between the Privatization Commission and the private management envisages a 7-year multi-year tariff formula with a clear condition that the new management will not increase the tariff except fuel prices. However, they will be free to import cheaper fuel through their own resources instead of buying fuel from PSO. Having their roots in the oil rich Saudi Arabia, the fuel price may not hit the tariffs of the KESC, Brig. Sadduzai expressed the confidence. It has also been agreed by the new management that it will pass on the benefits to the consumers as soon as the company becomes a profit making entity, hence there are strong indications that the tariff will come down because all bottlenecks have been removed and the company is well poised to be a growing concern, said KESC chief.

Elaborating the current status of stable power supply, better customer services and profitability, he said that these were three indicators which are strongly pointing towards the revitalization of city power utility.

Recalling early days when he had joined KESC four years back, he said KESC had to resort to load shedding to the tune of 1.3% to overcome the power demand of 1200MW in the power starved city of Karachi. Today, the demand for electricity has increased to 2173MW yet the management has succeeded to reduce level of load shedding merely to 0.4% despite the fact that no major investment was made in power generation of KESC.

He said the first task given to the army management was to keep it a float, still we reduced the losses from 17 billion rupees to 6 billion rupees with a downward tend towards Rs3 billion next year. By the year 2006-7, the organization will be making a profit of Rs1.6 billion.

The HUBCO-KESC link is being established to provide an additional 1000MW into the KESC system. That additional supply from HUBCO will certainly provide a cushion to the power supplies for a certain period. However, the new management would have to set up new power generating units to match the demand growth in this largest industrial hub of the country.

Regarding rehabilitation and up-gradation of the transmission and distribution network, MD-KESC said government has provided a fund of Rs6 billion for upgrading the Transmission System. So far 10 power transformers have been installed while 12 more Grid Stations are in the pipeline. As far as Transmission & Distribution losses were concerned they have been reduced from 41% to 33% by February 2005.. One percent reduction amounted to Rs500 million savings per year.

In order to provide better customer services, KESC has restructured its entire distribution and billing structure and instead of 20 zones, a network of more than 110 sub-divisions have been established where one window service being offered to the consumers. The consumers have not forced to seek Sifarish or pleasing the corrupt to get installments or get resolved their billing problems. A system has been developed for an easy access of the consumers to the concerned authorities. Besides the relief packages for payment of outstanding dues were introduced, the consumers are entitled to get 30 installments that also at the consumer door-step, rebate of 70 to 20 percent on full payment of outstanding amount etc. All these forms have helped developing a culture focused at helping out attitude towards the consumers. Though these over 100 zones developed to facilitate may not be coming up to the expectations of the customers, yet the foundations of a culture aimed at honoring the inner respect of the consumers have been laid, these values are expected to go stronger in the days to come. It is now the responsibility of the society to make the system a success.

I personally believe that people of Karachi, a city which is generally known as a hostile city, should duly acknowledge the efforts of Brig. Sadduzai for his bold decisions for breaking the bureaucratic hurdles he took during his 4-year tenure to facilitate the people of Karachi if they believe that the virtue really deserves to be rewarded.

Brig. Tariq Sadduzai was assigned the task to make the KESC financially viable so that the government could get rid of its liabilities in the form of huge budgetary allocations every year. The task is done. Brig. Sadduzai either may go back to the barracks or may be placed in some other government organizations suffering financial ills or bad management.

Being an aeronautical engineer, he can produce much better results in aviation sector organizations like PIA which had thoroughly disappointed the small investors who had purchased its shares in the hope of getting profits.