July 13 - 19, 2009

The prime reason for the poor financial health of electric utilities in Pakistan is rampant power theft going on for decades. Until power generation, transmission, and distribution was under state control, covering up the massive theft was easy. The difference between number of units dispatched and the number of units billed is classified as transmission and distribution loss. However, with the state owned companies now are buying substantial number of units from the IPPs not only the quantum of theft has become more visible but also pinching.

It may be said that power theft has proliferated under the patronage of the high ups. To cover up the pilferage consumers have been issued bills on 'average basis' and without reading the meters. On top of this tariff has been increased persistently to enhance revenue. However, increase in cost (mainly furnace oil) often exceeds revenue.

Consumer indulging in electricity theft can be divided into various groups. The most talked about group is domestic kunda beneficiary. They are huge in number but the average pilferage per kunda is very low. However, when all such kunda are added power theft may look significant but would still constitute small percentage of total united dispatched.

The second group comprises of owners/tenants of commercial buildings and include from a panwala to a superstore or restaurant. Interestingly, in some of the areas where pushcarts encroach streets and roads all the vendors are the direct beneficiaries of the kunda system. They pay a nominal 'bhata (extortion) and enjoy unlimited supply. It seems that higher-ups never visit these areas or are completely ignorant of whatever is going right under their nose. This group is the second largest power thieves.

The biggest group comprises of owners of large factories, residents of posh localities and skyscrapers. Factories normally have more than one connection. Nominal load and kundas supply bulk of the load. In posh localities, houses have up to a dozen air-conditioners operating 24 hours per day but all of them are connected through a kunda installed at a distance of couple of kilometers. In many of the commercial buildings, lifts and staircase lights operate on either on a kunda or a temporary connection (another form of kunda which enjoy legal status).

One of the reasons for the proliferation of kundas in low-income areas is denial of official connection by the utility companies. The basis on which a connection is denied includes 1) demand exceeding supply, and 2) non-availability of pole and wires, etc. However, when the applicant offers bribe, the connection remains not an issue. The only problem is actual consumption is on the rise but official figures remain flat.

There is a growing consensus that peak load in KESC franchised area touches almost 5,000MW but utility company still claims that peak load is less than 2500MW. As against this KESC's in-house generation capacity is around 1100MW. Therefore, telling the applicants about the shortfall is a routine. However, every month hundreds of new connections are given.

The level of pilferage can be gauged by the fact that the number of units billed at KESC is less than its in-house generation. Whatever it buys from IPPs and PEPCO goes straight towards T&D losses. In such a situation, incurring billions of rupees losses every month is but natural. The net result is that it cannot pay to fuel suppliers and circular debt is on the rise.

As long as financial condition of KESC remains precarious, the utility would not be able to enhance its power generation and revamp transmission and distribution network. KESC has succeeded in enhancing electricity availability but failing grossly in increasing number of units billed. This is the reason its financial condition remained fragile when it was working under state control and the issue aggravated after the privatization. Neither the provincial government nor the city government has extended it the helping hand in removing the kundas and recovering the over dues.

In an attempt to save electric utilities from going bankrupt, government has been injecting billions of rupees but all in vain. Unless T&D losses are reduced cash flow of these utilities cannot be improved. Those opposed to the basic idea of privatization of electric utilities are trying to prove that KESC cannot work efficiently by private management. They have already succeeded in delaying privatization of corporatized entities of power wing of WAPDA.

It is necessary to recall that the government initiated the process for the privatization of Faisalabad Electricity Board in nineties and PEPCO was created as a holding company to facilitate privatization of corporatized entities of power wing of WAPDA. However, government succeeded in privatizing KESC, which opponents of privatization felt like a slap on their faces.

They do not wish that financial condition of electricity improves, to ensure that they keep on draining out strength in the form of huge T&D losses. KESC is a compact and integrated utility and its T&D losses should be brought down to around 5% from current around 40%.

It has also been proposed to divide KESC into six companies, one general, one transmission, and five distribution companies to make them economically viable and manageable entities. Although, the proposal has been resisted there in no harm in exploring the option afresh.

Karachi has a latent electricity demand of 5000MW. Each unit generated must be accounted for and billed. It is the duty of every citizen of Karachi to identify and put to task those who steal electricity. Every individual irrespective of language he speaks and political party he favors must pay for the units being consumed.