KESC CAPS TARIFF INCREASE

Voluntary offer made by KESC to NEPRA for not raising power tariff next 5 year

By AMANULLAH BASHAR
Jan 26 - Feb 01, 2004

Karachi Electric Supply Corporation (KESC) has put a cap on the increase of electricity charges for next five years. The decision has also been conveyed to National Electric Power Regulatory Authority (NEPRA), it is learnt.

The decision however is eyewash for the consumers. The existing electricity charges coupled with the government levies like Surcharge, Additional Surcharge and Fuel Adjustment Charges obviously are unbearable for the industry as well as the majority of the people falling in average income group.

Although the KESC has managed to reduce its transmission and distribution loses from 40 percent to 38 percent during the current financial year, yet the major cause for high rate of line losses (power theft) was high price of electricity compelling consumers for power theft. People have expert opinion that the only way to overcome the problem of power theft is to bring down power charges at an affordable level. They give the example of the consumers of natural gas where the theft cases especially on the domestic side are almost nominal.

FUEL

Actually, the factors behind voluntary offer made by KESC to NEPRA for not raising power tariff next 5 year, were sharp decline in fuel expenditures as the utility has been shifted its entire system from oil to natural gas which according to an estimate was much cheaper as compared to imported fuel oil and above all the gas is produced within the country.

The sharp decline in fuel expenditures has enabled the KESC to play its due role in economic growth of the country in general and a rapid industrialization of the this commercial hub of the country by giving much sought after relief in power tariffs.

There is no second opinion that expensive electricity has contributed in enhancing the poverty rate in the province of Sindh and the people in the middle and low middle class are the direct victims of the exorbitant electricity charge. Since poverty alleviation is on top of the government agenda, it is the time that the concrete steps should be taken to effectively check growth in poverty.

The Federal Minister for Water and Power Aftab Ahmed Sherpao has also conceded that power rates in Karachi are higher than the rest of the country. Why this discrimination is being meted out with the people of this metropolitan when it is contributing more revenue as compared to rest of the country. The recent announcement to slash 9 Paisa per unit in the KESC regime would not make any significant impact on the overall electricity expenditures. The previous government of Nawaz Sharif had cut down Additional Surcharge by 50 percent however that exemption was withdrawn later on due to increase in international oil prices. Now the KESC was no more dependent on import fuel oil, it will be in the economic as well as national interest to do away with the additional surcharge on the electricity consumption.

TASK COMMITTEE

Although President Musharraf has appointed a task committee to give its proposals and ways to reduce power charges, however, the committee has not so far come out with its recommendations. Which is much awaited by the poverty ridden domestic consumers on one hand and the industrial consumers on the other hand in the face of the fast approaching WTO. If the electricity charges were not reduced to an affordable level, majority of the manufacturing sector would have no choice but pull down their shutters as they might be not in a position to compete with the much cheaper products start flooding into the country after 2005.

It is the shifting from oil to gas which helped KESC management to overcome its losses by Rs3 billion last year and the target for the current year is set for Rs5 billion. In fact, the positive development has raised hopes for the KESC to put the corporation into a profit making company in the year 2005. All these improvements have made it easy for the Privatization Commission to find a suitable buyer for the company.

According to informed sources some of the investors including a multinational company have expressed their willingness to buy KESC. The Minister for Privatization and Investment Dr. Hafeez Sheikh has also indicated that the KESC has come out of the troubled waters and things are attractive for the private sector to take charge of the company. He has also invited the business community to form a consortium for buying the KESC.

Meanwhile, NEPRA Chief who had recently met Managing Director has assured that he would take up the matter for early implementation on the KESC-HUBCO direct link project and PC-1 has already been approved by ECNEC. The government has given a go ahead to the direct link between the KESC and the HUBCO. The work on this project would be carried out on a turnkey basis. The tenders for the project had already been issued.

The Federal Minister for Water and Power says that the current capacity of KESC power plants was 1,364MW of electricity and this capacity is being enhanced to 1500MW. Under the capacity enhancement plan, KESC would install ten 40MVA-power transformers by June this year. KESC would also be installing 12 grid stations by 2006.