ISLAMABAD: The Privatization Commission in its latest report termed the privatization agreement with the KESC, ‘a week agreement.’

‘The Case Study of KESC,’ an analysis conducted by the Privatisation Commission revealed that the new management was in breach of the agreement with the Government of Pakistan.

The report said that the new management, Abraaj Entity, failed to install additional generation capacity of 1,000 megawatts within three years of the privatization and that there was also no improvement in the transmission system.

The Commission has recommended that the government conduct a comprehensive ‘technical audit’ of power plants owned and operated by the KESC.

When contacted, the Federal Minister for Privatization Syed Naveed Qamar said that the KESC example has overshadowed the entire investment climate in the country.

The minister said that there was a lot of documentation and many legal aspects that missing in the agreement. For example, Qamar said, the purchase agreement which was not as strong as it should be, as it was missing the bank guarantees that required judging the worth of commitments of further investments in both distribution and generation. These commitments were locked in without much needed bank guarantees, he added.

Earlier, in the National Conference on ‘Privatisation with Public Private Partnership,’ the World Bank’s country Director in Pakistan, Yusupha Crookes said that the privatisation policy of the present government was complicated, because of which transactions continued to linger. Mr Crookes suggested the government streamline and simplify its policies so that foreign investors could easily understand them.

Syed Naveed Qamar in his welcome address said that the government has revamped its privatisation policy and decided that the government will not sell more than 26 per cent of share of any entity. He said that 12 per cent shares of an entity will be reserved for workers.

The Advisor to Prime Minister on Finance, Shaukat Tarin, said that the government couldn’t afford paying huge subsidies on electricity for long. Therefore, Tarin said, the government has planned to privitise all the power generation and distribution companies as soon as possible.

Later, talking to reporters, Tarin made assurances that the government would not increase power tariffs until load shedding was completely halted in December 2009. To a question he admitted that the increase in petroleum prices would be inflationary and it would be a challenge for State Bank to maintain the money supply. Tarin went on to say that the government wouldn’t interfere in the setting of petroleum prices and all benefits would be passed to consumers as prices fall in international market.