Mar 14 - 20, 2005

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 agreement.

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.