Much has been written on the KESC. But all in vain. The uninformed people running it had boasted in 1999 that given two years’ time they would turn it around. The people who promised that are still crowing their achievements both at Wapda and KESC for everyone to see and the people who, in their naiveti believed them are in Jeddah.

All else having failed, privatization offered the only escape from the mismanagement trap the uniformed people have woven around us. One has to privatize to cut the losses and save the consumers from the torture of prolonged shutdowns.

Privatization is intended primarily for two reasons. One, to induct competent management and two, inject fresh investment. Annual Report (2001) of the Privatization Commission (PC) had envisaged sale of 51-74 per cent shares of the KESC by third quarter of 2002. The Asian Development Bank has been relying on our worthless commitments to privatize in its keen desire to burden us with more loans. Incidentally, the goal posts have been shifted again and again.

Failure to privatize the KESC has been a stinging stigma on the capabilities of Privatization Commission. The environment and particularly the investment climate are blamed for lack of progress, which is a chicken and egg situation. If one waited long enough, the utility will simply have disappeared under the rubble of mismanagement.

When we fail to do some thing, we get a vision. Ordinarily, a people without vision to underline their handicap we come up with visions. Wapda has come up with Vision 2025; Ministry of Commerce with Vision 2015 for doubling or tripling our exports and the Privatization Commission, not to be left behind has a simple “Our Vision”. To quote the PC: “KESC is likely to be the first privatization in the power sector.” It goes on to say that the Government is committed to privatizing all its distribution companies and all its thermal generation plants. That is a lot of bluster.”

It was in 1998 that as Secretary, Water and Power this scribe attended the first of a series of meetings of the Privatization Commission, where its Financial Advisor made fancy presentations to about 60 participants for hours. Lunch was served. I asked a simple and apparently an uneducated question. When would the privatization take place? No one had an answer. I advised the PC to save thousands of dollars per month it was paying the Financial Advisor since privatization appeared nowhere in sight. The then Chairman PC blew his top at the unsolicited suggestion, and obviously did not heed the advice.

This was followed by a meeting with the Prime Minister. The same Financial Advisor made a second rate presentation. He must still be in business. It was decided on the suggestion of the present Chairman WAPDA doubling as the Chairman, KESC that the privatization should be postponed for two years so that he could turn the KESC around. One has to ask any one in Karachi to confirm the turn around brought about through his exertions. In one of his visits to the Dawn office he admitted line losses to have been of the order 60 per cent. Somebody is out of ones mind.

It was the year 1994-95 when the utility went into a downward spin, reflecting a phenomenal failure of management. Line losses more than doubled from 17 to 40 per cent in less than 20 years. This table is a microcosm of our management failure and would show that during the military control of the KESC T&D losses have jumped from 38.64 to 40.10 per cent. The KESC claimed “peculiar socio-economic and political environment leading to a law and order situation where even with the present (army -assisted) management it was not possible to reduce pilferage/losses’. This inane admission of helplessness is belated and pathetic and calls for an immediate replacement of the entire top management by professionals for lack of competence and integrity. Not only that; the management must also be punished for its failure.

Then there is the question of ever-rising tariff. The last tariff petition was filed by KESC with Nepra for an average increase of 47.5 per cent. But it soon saw the absurdity of it and filed a revised petition for 16 per cent increase. The KESC also requested for a 10-year’s tariff, purportedly to help privatise but actually as a device to derail the process, if it ever were on rail, and to escape the rigours of periodic review of its performance by NEPRA, which has emerged as an independent regulatory authority of sorts, because before deciding on the petition its provides an opportunity to the stakeholders to present their viewpoint. KESC eventually got an average tariff rise of 6.5 per cent and quarterly automatic adjustment tariff for fuel prices up to 3 per cent.

Discriminatory tariff for Karachi consumers is another sore point. It was pointed out that the KESC was charging not only higher tariff than WAPDA but was also charging higher system development charges and security deposit. In spite of gas having replaced expensive fuel, the consumers continue to pay the surcharge etc. Its operation and maintenance expenses were also very high. It had failed to control expenditure on salaries of employees, quite a few of them from the military. Overtime payment also went uncontrolled.

Stakeholders highlighted the following reasons for its failure when contesting KESC’s claims before Nepra:

i) KESC’s high level of transmission and distribution (T&D) Losses;

ii) non-recovery of receivables;

iii) high operation and maintenance costs and iv) The fear that the tariff increase was being demanded only for facilitating the KESC’s privatization and encouraging investors.

Industry has been hit hard by its inefficiency and most have shifted to self-generation. With WTO regime staring in the face, two years, for now, we have virtually killed the industry.

The operational efficiency of KESC has not shown any improvement in spite of full support of the government in men and material. Power plants operate at a lower level of efficiency at an average level of 32 per cent. This level of efficiency is about 6.6 per cent lower than that of IPPs.

One of the recommendations made by the interveners was that the poor performance and consistent failure of the KESC underlined the need for Nepra to invoke Rule-8 and to appoint an administrator by suspending its licence for consistent failure.

The government has handsomely rewarded the KESC for the failure of its management. The government has converted Rs83 billion worth of loans to equity. It supplemented that largesse with an outright subsidy of Rs8 billion. The situation has aggravated to a non-sustainable level, therefore the government sees privatization as the only way out and a multi-year tariff is considered as a prerequisite. The PC has planned that the prospective investor will purchase 51 to 74 per cent of KESC to be able to take over management and control for the utility. Its share has a negative worth, and one will have to be paid to induce him/her to accept a KESC share. It will be very difficult to find an investor for the utility.

Actual cash outflows have mostly exceeded the estimates because of higher actual losses. The inability of KESC management to achieve the stipulated target of losses generates the compulsion to resort to tariff increases or increased borrowing. Limited capacity to borrow money at reasonable interest rates and the counter productive effects on revenue of a raise in tariff compel the government to lighten its burden by paying subsidy.

Nepra has long last reached the most obvious conclusions that the experiments with public sector management through non- traditional methods including the induction of army personnel in uniform as top managers has not shown any significant improvement (more whatsoever) in reduction of technical losses and pilferage. This is a harsh and belated indictment.

Audit by an independent agency is strongly indicated to ascertain facts. KESC suffers from its management. Replacing one top manager with another of equal incompetence will not do. A real professional is required to turn it around. All the failures of the utility are directly ascribable to management failure. Top jobs cannot be earmarked for on the job training of novices. Official T&D losses ranging between 40-42 per cent are only symptomatic of the malaise. Of course, they are unacceptable, and forebode certain collapse of the utility.

Inconvenient truth bears repeating that it is the management that failed even before it got started, because it lacked the skills, competence, training and integrity to measure up to the job. Give the KESC as many raises as they want and yet the utility is bound to sink under their stewardship into a deeper cesspool. It is time that the custodians of the country’s fate decided if they would continue to sacrifice national interest over shortsighted corporate considerations?