March 14, 2003	Friday	Muharram 10, 1424

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ISLAMABAD, March 13: The federal government is considering many options to make the Karachi Electric Supply Company (KESC) profitable, including an offer for a new “management contract” to any reputed private sector party.

Official sources told Dawn here on Thursday that the Privatisation Commission (PC) has also directed the KESC’s financial adviser, M/S Pricewaterhouse Cooper, to set up a consortium of domestic investors based in Karachi to bid for the power company.

The government was also considering to lower tariffs of the KESC and find out ways and means to deal with the issue of “overstaffing” so that it could be prepared for eventual privatisation.

The PC has collected reports of some major state sector water and power companies in Argentina and Mexico that reduced their tariffs on the recommendations of the World Bank and made substantial profits.

The purpose, the sources said, was to find out strategic partners to run the KESC on modern lines by also arranging outside equity stake that would help reduce its huge line and distribution losses.

They said it was also being considered to unbundle services of the utility into separate generation, transmission and distribution companies.

The idea, the sources said, was to stop the daily average Rs50 million losses of the KESC, especially when the PC had not been able to find out many buyers for it. There still existed 40 per cent line and distribution losses. The menace of “Kunda” had not been overcome as many people within the KESC and other departments concerned were reportedly not fulfilling their duties honestly.

Initially, only three companies including M/S AES had shown interest in buying the KESC, but currently they too were dragging their feet due to fear of attack on Iraq by the United States.

Moreover, these three companies were also facing financial and administrative problems.

“We have to make a much harder effort to either make the KESC financially viable or get it privatized,” said a senior official.

He told this reporter that despite pumping of $150 million in the KESC, it had not been pulled out of various problems, including that of huge leakages.

The sources said a technology was available to stop leakages, but it required immense investment which presently the government was not in a position to pump into the KESC.

The government has been told that 50 per cent revenue of the power utility was not being collected due to one reason or the other.

In October last, the federal government had approved Rs8 billion additional supplementary grant for the KESC to help improve its financial health. Previously, Rs30 billion were also approved— Rs15 billion each for Wapda and the KESC—to improve their financial position.

The sources said the process of restructuring of the power utility was not picking up, despite various directives given by President Gen Pervez Musharraf on various occasions.