ISLAMABAD: Expecting to get $5 billion in a year from the sale of state assets, the government said on Wednesday that conditional transfer of power distribution companies to provinces, particularly Sindh, was not acceptable.

At the same time Chairman of the Privatisation Commission Mohammad Zubair came out in strong support for K-Electric.

He told the Senate’s Standing Committee on Privatisation that the Sindh chief minister had recently written a letter to the prime minister asking him to hand over Sukkur and Hyderabad electric supply companies to his government to avert a Karachi-like situation in the regions served by them.

Mr Zubair confirmed that the sale of Heavy Electric Complex was cancelled after the single successful bidder had submitted a cheque which was dishonoured.

He said the government expected the sale of national assets, mostly those in the power sector, including Pakistan Steel and PIA, would generate $4-5bn during the next financial year. The total proceeds of all the 69 entities approved for privatisation by the relevant cabinet committee were “roughly assessed at $40bn”.

Referring to the sale of distribution companies to the provinces, he said that conditions like requiring the federal government to provide subsidies for five years even after the transfer were not acceptable.

He said the Pakistan Tehreek-i-Insaf had raised a similar demand for the Peshawar Electric Supply Company in 2013, which was taken up by the Council of Common Interests, but the provinces expressed reluctance to take over distribution companies with liabilities.

Mr Zubair then surprised the senators, who were asking questions about K-Electric and partly holding it responsible for heat-related deaths in Karachi, by praising the performance of the company.

He said the Lahore city faced daily loadshedding of more than six hours, while power supply in Karachi might be experiencing suspension of supplies for six hours in a month.

He told senators from Karachi that deaths caused by suffocation were not mainly because of K-Electric. Such events, he said, also occurred in New York. A day of power breakdown would not make the KE the worst performer. “KE is showing remarkable performance,” he said. But Minister of State for Power Abid Sher Ali had earlier said that the government could take over the company.

Mr Zubair argued that if K-Electric violated agreements with the government it was for the regulators to intervene. He claimed that the Harvard Business School regarded K-Electric as a successful model.

Nasrin Jalil of the MQM criticised the government for leaving the people of Karachi at the mercy of KE and deplored that despite 26 per cent shares held by the federal government, Sindh had no say in its affairs and even the federal government did not do anything as hundreds of people died. She said the privatisation should lead to competition in the private sector, but the government was transferring public monopolies to private sector monopolies. “When the public sector washes its hands off doing public welfare why would the private sector do it?”

Kamil Ali Agha of the PML-Q said there were grey areas in the Karachi Electric Supply Company’s privatisation and subsequent agreements, adding that supply of 300MW from the national grid to KE had been increased to 650MW. KE was selling electricity at Rs22 per unit after purchasing it at Rs1.50 from the national grid, he added.

But the standing committee directed the privatisation commission to offer public utilities like the power companies to provincial governments before their privatisation.

Chairman of the committee Saleem Mandviwala said the provinces should have a role in the affairs of utilities when the federal government divested its interest to pre-empt a KE-like situation in other distribution companies.

Mr Zubair said the government had learnt lessons from the KESC’s privatisation and would consider giving some role to provincial governments while privatising other power companies. He said the privatisation commission was sending reports of all its transactions relating to sale to the National Accoun­tability Bureau and Public Procurement Regulatory Authority for review.

But Mr Agha said that both the institutions were useless as was evident from boats full of dollars sailing out of Pakistan and filling Swiss banks. Also, he said, the PPRA chairman had conceded that the authority had noted 50,000 violations of procurement rules but did not take any action.

HEC SALE CANCELLED: Mr Zubair confirmed that the privatisation commission had cancelled the sale of Heavy Electrical Complex. “We have no ego. We have issued a notice to them (the successful bidder), forfeited their earnest money (Rs25 million) and revoked the letter of intent,” he said.

Senators questioned the mechanism which led to cancellation of the deal at the last moment even though newspaper reports had been pointing out the weak financial position of the bidder. The reports not only suggested low price of Rs225m quoted by the bidder but also raised questions about their credentials.

Mr Zubair confirmed that the single bidder was trying to wriggle out after signing the sale agreement and submitted a cheque which bounced.

Published in Dawn, June 25th, 2015

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