KESC PRIVATIZATION IN NOVEMBER
10 and 25 Paisa per unit relief on domestic and industrial consumers
By AMANULLAH BASHAR
Sep 27 - Oct 03, 2004
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 conclusion.
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 supplies.
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 basis.