July 13, 2003

The woeful tale of power outages continues unabated. Suffering from inefficiency and financial losses, the KESC seems headed for disaster

WITH operating and T&D losses mounting, the Karachi Electric Supply Corporation is heading for disaster. And despite the waving of subsidies by the federal government and the provision of financial support by the provincial set up, complaints against power failure, irregularities and corruption are being registered more consistently.

The major sickness that the corporation suffers from is that it cannot control the transmission and distribution losses which now amount to over 40 per cent and are a worrying factor. The setback is an all time high in the KESC’s history and despite the fact that its management has been taken over by the army there has not been any reduction of the deficit.

The figure of 40 per cent means that the cooperation has been unable to bring in an amount of Rs 18 billion under the profits head. Official auditors have attributed these losses to the alleged theft of electricity which has directly affected the corporation’s profitability. They have termed the amount stolen as indeterminate, obviously the finance department keeps a tight lid on these details as it will expose the management’s gross inefficiency.

Figure jugglers in the KESC divide the percentage of losses to fifty/fifty attributing it to pilferage and transmission due to obsolete equipment. But the truth may be horrifying if the calculations are made public and can assume dangerous proportions if it was exposed who pocketed the major share.

Only recently the KESC chairman Lt. Gen. (retd) Zulfikar Ali Khan admitted that T & D losses were 60 per cent before the army takeover. But financial records show this figure as 38.64. So obviously one of them is lying and is not ready to shoulder the responsibility of the huge losses that the corporation is suffering from the fiscal year 1994-95 onwards.

Tracing the previous records, the percentage of T&D losses was 38.64 before the changing of the guards and was nominally reduced to 36.81 during the fiscal year 2000-2001 probably due to stringent measures. But containing the pilferage is once again out of control and the percentage has jumped to 40.78% A total of 6.025 billion units were made available for distribution during July-December 2002 but surprisingly only 3.618 billion units were billed. Where have the nearly 40 per cent of the total units disappeared, remains a complete mystery. Since the KESC’s accounts are not audited by the government departments, it is difficult to identify the missing units.

A review report from Ford Rhodes Sidat Haider and Company, chartered accountants state that “we conducted our review in accordance with the international standard on auditing applicable to review engagements. This standard requires that we plan and perform the review to obtain a moderate assurance as to whether the financial statements are free of material misstatement. A review is limited primarily to inquiries of the corporation’s personal and analytical procedures applied to financial data and this provides less assurance than audit. We have not performed an audit and accordingly we do not express an audit opinion.”

Instead of improving the management the federal government, on their part have recently agreed to provide Rs 13.349 billion in budget funding for three years out of which an amount of Rs 108 million has already been released as first instalment.

The said total amount has been approved for the removal of kundas, the shifting of energy meters outside the premises, the installation of ATBs on the meters of industrial consumers, bus bar arrangement in multi-storied buildings, the reinforcement of undersized conductors for the improvement of voltage and reduction of losses, the installation of meters on transformers and PMTs, the improvement of protection systems, the improvement of 11kv feeders, the introduction of aerial bundled cables in kunda concentration areas and the restructuring of billing zones. If all operations and implementation is taken in earnest, it will take a minimum of three years for the turn around but consumers have doubts and suspicions that the present nucleus of top officers could acquire the will and courage to fight against the corrupt elements.

The said financial support from the federal government is in addition to the increase in electricity tariff allowed by the National Electricity and Power Regulatory Authority. Shockingly the consumers were crushed by the revision of power rates 13 times since the army management took charge. So instead of rectifying problems relating to heavy line losses, theft of electricity and rampant corruption, NEPRA has opted for punishing the majority of consumers who actually pay their bills promptly. The increase in rates is perhaps the easy way out for the bureaucracy which is not willing to confront the dangerous situation of weeding out the corrupt elements.

The issue has now taken a new political twist as the Sindh Governor constituted an advisory committee headed by Mr Khalild Ahmed Khan, Minister of State for Finance, Water and Power. The only action taken by this committee in a single meeting was to form sub-committees comprising MPAs and councilors of the areas for the feedback on electricity theft. The outcome from such committees and their subordinates is well known to everyone.

The current performance of the corporation has led to huge pressures placed upon consumers in Karachi and surrounding areas as power failures continue caused by load shedding, obsolete equipment, faulty installations and inefficiency of workers.

The power disruption and voltage fluctuation is causing wide spread damage to electrical appliances. Consumers can only grind their teeth while paying the high cost of repairs and replacements. There is nothing one can do about the damages. There is no redressal of their grievances as their complaints fall on deaf ears. Because of the monopoly of the KESC people are suffering frequent power breakdowns, voltage fluctuations, increasing rates and above all harassment of consumers in the shape of excessive and over billing.

A former bureaucrat managing director of the corporation had admitted in public that there was overbilling of Rs 6 billion causing the consumers grief. The amount was transferred to receivables to fake reduced losses.

It was obvious that most of controversial inflated bills could not be settled in time resulting in an out-of-the-blue late payment surcharge. An amount of Rs 550,772,000 was received from consumers in respect of late payment surcharges by the end of the last fiscal year. At the time of the settling of outstanding dues through instalments such charges had accumulated over a long period. A large number of consumers have now been exhausted after trying hard to rectify the average billing on the pretext of it being ‘not available’ alongwith terming the meters as faulty and sticky.

In a bid to streamline the working of the corporation, the army management dismissed 66 officers from service under KESC rules while the numbers of stall members dismissed was 190. In addition 20 officers were retired under the Ordinance 1999 while two were removed from service. The number of staffmembers retired stood at 20 while 21 were removed under the same ordinance. Six officers and four employees were dismissed or removed from service under Ordinance 2001. A total of 72 were demoted, one annual increment for 91 was stopped and surprisingly only 110 were let off after the issuance of warnings.

There are 1400 officers out of a total of 11,096 employees and considering the number of those who were punished (921), the rest must be angels to be working ‘honestly’. Besides they are provided electricity free of charge and don’t undergo the torture that genuine consumers suffer to know the suffering that Karachiites experience.

Observing the KESC’s functioning, it is evident that the monopoly of the corporation has to be broken through privatization and allowing private sector companies to sell electricity to the sprawling metropolitan.

The announcement of the Federal Minister for Privatization and investment Dr Abdul Hafeez Shaikh that the corporation is to be privatized in three months has come as a breath of fresh air. Setting aside the political nature of such statements one hopes that the new minister is serious about his intentions of providing better service to the utility’s consumers at low rates. The present horrible state of the corporation can be judged from the minister’s remarks that it would be sold on “as is where is” basis.

Since the organization is a highly transactional entity there were bright prospects of investment from within the country and from foreign companies. The potential investors from Pakistan should be welcomed first and then investment from the Unite States of America may be given preference due to the current strengthening of relations between the two countries. The first relief that is expected from privatization is the lowering of energy rates which are at present the highest in the world and improved services.

The worrying factors for investors will be the corporation’s current liabilities of Rs 24 billion and an accumulated loss of over Rs 66 billion but the ‘white elephant’ has plenty of assets and potential for those private investors who want to enforce a turn around and rescue the people of Karachi from further harassment and torture.

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