December 14, 2001	Friday	Ramazan 28, 1422

ISLAMABAD, Dec 13: The federal government has decided to make special budgetary allocations in 2002-03 to fund a special financial restructuring package for the Karachi Electric Supply Corporation.

The package would enable the government to take the utility to the sale counter by July 31, 2002 and complete its privatization process by Dec 31, 2002, official sources said.

It has also been decided that police and armed forces support to the corporation would continue till its transfer to its buyer for effective revenue collection, recovery of arrears and reduction in electricity theft.

Mainly because of theft and arrears, the per unit purchase price of electricity by KESC comes to Rs6.2 as against average tariff of Rs4.3 per unit.

The privatization strategy for the KESC would be approved by the cabinet soon after Eid. The strategy is expected to include setting up of an adequate transitional regulatory framework for automatic fuel adjustment in tariff besides a decision regarding a new financial structure of operations.

Once this package is approved, the government will conclude before the end of this month a memorandum of understanding with the KESC on the performance targets and regular reporting on such targets as well as needed adjustments in tariffs and prices for the transition period.

The International Monetary Fund has agreed on the restructuring package, submitted by the financial advisers of KESC, Price WaterHouse Coopers, late last month.

At a meeting held in November with Finance Minister Shaukat Aziz in the chair, the Asian Development Bank had agreed to become equity shareholder in the utility to the extent of about 7 per cent.

According to official documents, KESC’s revenue during the current fiscal year is estimated at Rs35.78 billion against last year’s Rs29.99 billion. Its expenditure is expected to increase to Rs50.6 billion against Rs45.96 billion last year.

Total fuel and electricity cost is estimated to reach Rs34.176 billion against Rs31.89 billion during the last year. Financial charges of the corporation would also cross Rs8 billion during the current fiscal against Rs6.5 billion during the last year.

Net operating loss for the current fiscal is estimated at Rs14.8 billion against Rs16 billion during the last year, and gross operating loss would amount to Rs11.65 billion. Net financing requirement of the corporation is estimated at Rs15.2 billion for the current fiscal year.

The accumulated KESC losses are now touching Rs80 billion as annual losses amounted to around Rs15 billion. Of this amount, a portion would be covered through issuance of bonds and remaining would have to be taken over by the federal government to make the utility a loss-free privatizable entity.

A separate plan was also discussed that involved an additional provision for gas supply to KESC for the next couple of months. The additional gas supply would provide KESC a saving of Rs500 million per month.