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KESC bashing

September 12, 2013

THE Senate Committee on Water and Power thinks it’s a great idea for the government to renationalise the Karachi Electric Supply Company (KESC).

Not only that, they think it would be tremendous indeed if all those workers laid off by the new management were to be reinstated and their missed salaries for the period they were out of work reimbursed.

Consider the ‘report’ whose recommendations have been voted on and adopted by the panel, as reported by this newspaper, arguing that the KESC ought to be taken back by the government and the labour unions ought to return.

Now don’t get me wrong! I have my own concerns regarding what is going on at KESC, which I’ll share in due course. But in the meantime it’s important to understand that half-baked critiques of the sort adopted by the Senate panel do more harm than good because they distract energy away from the real issues.

As an example, take the case of the electricity that KESC purchases from the national grid. This purchase, authorised under an agreement under which the utility was privatised, has been attracting invective and angry huffing and puffing from our compatriots up north for far too many years now.

The argument goes something like this: the government gives so much electricity to Karachi that there’s none left for Punjab, meaning there is load-shedding in Punjab while Karachiites bask in unlimited supplies.

The assumption underlying this, of course, is that Karachi is not entitled to any electricity from the national grid. The obvious question is, why not? If the utility is privatised so what? Why should it not be entitled to buy electricity from the grid like every other utility in the country?

The next iteration of this argument will say that KESC doesn’t buy this electricity but takes it and doesn’t pay for it. The amount outstanding, they argue, has now climbed to over Rs70 billion.

For pure shock value, this is good. The figure is large, and lurking beneath this argument is the suggestion that the power utility has deep and sinister connections to high-ups in the government through which they are able to appropriate free electricity from the national grid and sell it as their own product to their customers.

Of course, this is bunk. Fact is that KESC refuses to pay because it is in turn owed a similarly huge amount by the federal government in the form of a tariff differential subsidy, which the government doesn’t have the funds to pay either. So KESC tells the government: ‘we owe you and you owe us, let’s just adjust the amount at source and call it a day.’

A few basic facts can help get us through this controversy. KESC purchases about 7.5 million megawatt hours of electricity from the national grid, give or take. It generates slightly less than eight million units from within its own system. Out of the 15.5 million units, almost one-third is lost and about 10 million units are sold to a client base of 2.5 million consumers.

The figures compare favourably with upcountry distribution companies. The Lahore Electric Supply Company, for instance, buys more than 16 million units from the national grid and distributes 14 million of those to a client base just above 3.5m consumers. Now do the math. Take the total units each utility sells, and divide it by the number of consumers and you’ll get the per capita power consumption in each distribution area. And you’ll find out that it’s almost exactly the same.

So how is it possible that in one area you have massive load-shedding while in the other things are better? Perhaps because one area is better managed than the other?

Even in Karachi there are plenty of neighbourhoods where there is large-scale load-shedding, but the problem is localised and in those areas where recoveries are weak, and therefore doesn’t become a cause for citywide disturbances unless a freak event causes large unexpected shortfalls, like an outage in a major gas field that suddenly constricts supply.

But what about the higher line losses in KESC? Even with 10pc line losses (that Lesco claims for itself), the per consumer availability of electricity in Karachi would not be that much higher than it is in Lahore.

Why not make KESC generate its own electricity to meet its needs so the additional 7.5 million units can be freed up for the rest of the country? Sure, that can be done, simply by diverting the gas that goes upcountry from Sindh and providing it to Karachi instead.

Imagine if all the provinces started making the argument that they don’t like it when other provinces partake of a good produced in their jurisdiction. So Sindh keeps all the gas, and Khyber Pakhtunkhwa can keep all the electricity produced by Tarbela Dam, and Azad Kashmir keeps everything that Mangla produces. Where does that leave Punjab?

Fact of the matter is this country is able to generate a GDP in excess of Rs10 trillion and sustain a labour force of more than 60m people mainly because some sense of how resources are to be shared prevails, however conflicted it may be.

Water and gas and electricity and fiscal resources all belong to the country as a whole, and it is wrong to argue that some sections of the country are more entitled to these than others.

It’s true that a rule-based system is required to govern the allocations of each, and in the case of water and fiscal resources, such a system already exists in the form of the latest NFC award, and the water sharing accord of 1991.

But my real irritation with this line of argument is actually that it distracts us from the real concerns that need to be raised regarding KESC, which are far more important than mere bickering over who gets how much. But more on that another time.

The writer is a business journalist.

Twitter: @khurramhusain