KARACHI, April 23: Questions are being raised and doubts are being expressed on the validity of the privatization deal of the Karachi Electric Supply Corporation (KESC) as the successful bidder, the Saudi investor Kanooz al-Watan has breached the contract by holding back the bid money of Rs20.24 billion even after more than two months of the open auction.
“Privatization of the KESC was open and transparent with no room for any doubt,” a business leader remarked who now doubts the validity of this deal after the breach of contract by the bidder. The government and the commission is going out of the way to accommodate the Saudi group, he pointed out. He is watching closely all the events after the public auction of 73 per cent KESC shares on February 4, the approval of the deal by the Cabinet Committee on Privatisation (CCoP) on February 7, the 13 days delay in despatching letter of acceptance to the Saudi investor on February 20, and finally the sending of the Privatisation Commission’s secretary Tehseen Iqbal to Saudi Arab last week amply indicates that there is something terribly wrong with the whole deal.
The February 4 public auction of the 73 per cent of the KESC shares was organized only on one condition that the bidders would simply offer their prices without any condition. The successful bidder was to make payment in two weeks. It went without saying that non-payment of bid money should have resulted in scrapping of the deal.
The Privatization Commission’s secretary alleged that some disgruntled elements in Pakistan have scared away the Saudi investors’ group. Enquiries made in the business circles and with the government sources point towards the powerful mafia of private contractors that thrive on an average Rs3 billion annual procurement programme of the privatised KESC might have scared away the Saudi investors’ group which is now apparently reluctant to take over.
“The privatization of the KESC will deprive them of this lucrative and easy money making business,” a business leader remarked. More than 100 such contractors supply a variety of material to the KESC round the year. Under government control the KESC‘s procurement is restricted to selected companies and firms that are protected against imported goods that are relatively cheap.
Yet another explanation is that the Saudi investors are too scared of the public agitation in Karachi against the frequent power failures that also interrupt water supply. Kanooz al Watan wants to wait till September and may be October next and see the troubling summer and monsoon months — May, June, July and August — pass away with KESC under the army management. On Saturday, the press reported public agitation in Pak Colony on Friday because of electricity break down and suspension in water supply. The situation is bound to aggravate in coming weeks and months when power breakdowns and suspension in water supply will be more frequent and summer heat more intense and intolerable.
Knowledgeable businessmen say that the Saudi investor has not been able to gather a good and efficient team of managers and administrators to run the KESC in a city of 15 million where people take to streets on a slight pretext. The group has been assured army support for three months after it takes over. It sought at least a year support.
Notwithstanding these issues, which are delaying the payment of bid money, the businessmen say that the two bidders were given more than one year to carry out due diligence. The Saudi investor too carried out due diligence for more than one year and raised many concerns. Apparently all these concerns were addressed to by the commission and the government. The February 4 open bidding of the KESC was held on “as-is-where-is’’ basis and after that any concern has no weight. The bidder has either to make payment and take over the management control or surrender Rs100 million earnest money and give up the deal.
“We are ready to hand over the KESC to the successful bidder,” Brigadier Tariq Sadozai, the Managing Director of the KESC told Dawn on Saturday. He elaborated in detail the massive reforms taken up in last few years to bring about an over all improvement in the KESC systems. “There will be no power breakdowns next year (06-07) when the KESC will show a profit of Rs1.5 billion,” he claimed.
The KESC management is handing over the quarterly accounts for January-March 05 for audit to a Committee of the Board of Directors on April 27.
Khalid Feroze, the President of the Karachi Chamber of Commerce and Industry and Dr Ikhtiar Baig, the Chairman of the SITE Association of Industry, both are on KESC’s Board, confirmed the meeting of the Board on Wednesday. The two business leaders also confirmed that the February 4 privatization was held without any condition. They expressed the hope that the KESC services woulsd improve a lot after the privatization.
