LAHORE, April 18: The Karachi Electric Supply Corporation (KESC) has sought exemption from the SROs of the Commerce Ministry regarding price preference to local manufacturers. "The SROs' implications are badly affecting corporation's finances," the KESC said in a letter to the Ministry of Water and Power.

The corporation has requested the Economic Coordination Council (ECC) to either completely exempt it from the SROs or at least grant a partial exemption to it when the items being procured on a free on receipt (FOR) basis from a local vendor with payment in local currency.

The ministry prepared a summary for the ECC on the basis of the KESC letter and sent it to the Water and Power Development Authority (Wapda) for advice. The summary stated that the KESC was implementing a Rs13 billion system improvement plan which was approved by the Executive Committee of the National Economic Council (ECNEC) on Sept 27, 2003.

Implementation of the plan necessitated large procurements of various types of cables, transformers, meters and other material. The corporation recently invited bids for these items and the financial implications of the SROs became evident.

The SRO827(I)/2001 dated 03-12-01 as amended vide SRO 660(I)/2002 dated 28-09-02, made it binding on the government, semi-government departments, autonomous bodies and corporations to grant a price preference of 15 to 25 per cent on procurement to locally-produced engineering goods over the imported one, because of local material used and value addition, subject to certification by the Engineering Development Board.

In view of the urgency of requirement and limited source of supply, the local manufacturers of cable, meters etc have formed cartels and substantially increased their prices while claiming price preference under the SROs.

In one such case, the three local manufacturers of HT cable, who had formed a cartel, quoted their best price of Rs1,515 per meter in December 2003 against their own price of Rs1,350 of July 2003. A third party offered the same cable of Korean origin at a rate of 1,332 per meter.

The EDB recommended order for the local manufacturers with a price preference of 25 per cent. If the order was to be placed with the local manufacturers, Rs23 million will have to be paid to them under the SROs. Similar practices of forming cartels and quoting exorbitant prices had been adopted by the other local suppliers of various items.

Implications of the SROs of the Commerce Ministry had been badly affecting KESC's finances. Since large quantities of cables, transformers, meters and other material, being produced locally, will have to be procured in the next 2 to 3 years, the financial effect will be exorbitant and ultimately increase the total cost of the system improvement plan.