AN escalating quarrel between the government and K-Electric, the country’s only privately owned power distribution company, carries grave risks for everybody. What is making the whole spat even more frustrating is that both parties to the dispute — the government and the management of K-Electric — lack credibility in the eyes of the public. K-Electric has used a slick public relations campaign to present itself as something of a miracle worker in lifting the power utility into profitability. But beneath this claim lurk a series of very serious allegations. They include charges of rapacious recoveries levelled by industrialists, allegations by the regulator that the top management at the utility issued instructions to staff to engage in overbilling, and more sinister accusations of gas theft, abortively touched upon by NAB as part of the investigation into the Ogra scam. It would be premature to conclude that the management’s job is done once the balance sheet shows a profit.

On the other hand, the claims and shrill allegations being made by the government against the utility also lack credibility. The government has told the Supreme Court that the power utility owes Rs130bn to the government whereas K-Electric’s own documents suggest that the amount owed is Rs72bn, while it in turn is owed Rs194bn by the government under various heads such as the tariff differential subsidy and overdue bills from KWSB and CDGK. The government has also alleged that the utility is not utilising its own sources of generation, preferring instead to rely on easy supply of power from the national grid. But is a reliable supply of gas available to enable own generation at full capacity? And has the government been prompt in paying the tariff differential subsidy it is required to pay in the event of generation using furnace oil?

Thus far the feud is restricted to words but if it should escalate it could rekindle memories of the disastrous episode with Hubco during the last Nawaz Sharif government. That act hobbled private investment in the power sector for years, in addition to playing a major role in causing multilateral inflows to dry up. The government must avoid letting matters escalate to that point in the present feud. Perhaps the best way to move things forward without damaging prospects for further private investment in the power sector would be to make public the implementation agreement of 2009 under which the current management of K-Electric assumed charge. More than the visceral words emanating from the Ministry of Water & Power these days, that document will make clear what benchmarks were set to assess performance of the new management at the onset of their venture. Since both parties to the dispute have gaps in their credibility, perhaps the public can be the best judge of who has a point and who is simply trying to deflect the blame.

Published in Dawn, July 1st, 2015

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