KARACHI, Nov 12: After the privatisation of the Karachi Electric Supply Corporation, the government has decided to privatise the Karachi Water and Sewerage Board and a foreign-funded study would be conducted in this regard soon.

Well-placed sources told Dawn that the Asian Development Bank would fund the study to evolve strategy for the KWSB commercialisation leading to its privatisation. The study, which would cost US$ 0.3 million, would be conducted by foreign experts. The sources said that the study aimed at introducing corporate reforms in the KWSB for its commercialisation and future privatisation.

They said that the study was a part of ADB’s US$ 10 million technical assistance loan given to the government of Pakistan for capacity building of the city government, town municipal administrations and other city agencies in Karachi’s future planning, management and financing as well as in applying commercial principles in the provision of infrastructure and services.

The loan is the first step towards the main ADB loan of US$ 400 million for Karachi Mega City Development Project.

According to an ADB document, one of the expected outputs of the study on KWSB commercialisation strategy is the potential for a successful partial or complete privatisation that would provide a good asset price to government shareholders and would ensure that the needs of customers and other stakeholders continue to be fully met in the long term.

The sources said that the ADB had already released required funds to the federal government, which transferred the amount to the provincial government. The foreign experts, who would conduct the 10-month study here, would develop strategies for outsourcing and commercialisation of the KWSB to place the water utility on a fully sustainable self-sufficient basis.

According to the objective of the study, sales of services to customers fully covers all operating and capital costs; the KWSB provides a return on investment to his shareholders; and making the entity ready to attract private investment and participate as a full partner in public-private partnerships.

The sources said that the capacity building team of foreign consultants would work in the light of findings of World Bank and Swiss Development Corporation for evolving a longer-term corporate strategy. The team would study at length and identify key issues most critical for the KWSB commercialisation and for preparing the government-owned utility for full private sector financing.

The study would review and suggest measures for structural changes, management accountabilities and organisational changes; workforce size, compensation and incentives; management incentives; greater customer oriented culture; technology and other opportunities to improve operations, efficiency and service delivery; procurement practices; financial management/systems and cost controls; asset management; investment and financing strategies; life-cycle costing; working effectively with tariff and other regulators; and the quality of service delivery and customer relations needed to better justify requests for higher tariffs that fully recover costs.

The long-term strategy for sustainable commercialisation will position the KWSB to attract and repay funds of the ADB, other international finance institutions, and commercial lenders, as well as to establish mutually beneficial public-private partnerships with private partners.

The sources said that any decision regarding downsizing in the KWSB would only be taken in the light of the recommendations of the report of foreign experts.

The KWSB has over 1.4 million consumers and the utility recently started issuing monthly bills to its consumers in a bid to increase its revenue and mitigate financial losses.

Earlier, the government had planned to privatise the water utility but failed to do so due to the pressure mounted by civil society against the privatisation. However, after the privatisation of the KESC, the government found no hurdle in its way to privatise the KWSB.