Karachiites - Be prepared for the nightmare ahead

FP Special Report

As the summer months have already started and the hot and humid heat has the mercury soaring, our lives seem to be stagnating into a state of limbo. The electricity situation in the city is no longer to be taken lightly. As post-privatization of KESC enters its second year we the residents can only foresee a doomsday scenario when there is no electricity left to generate.
The Financial Post team decided to go back in history to perhaps try and decipher the sad tale of what went wrong and has continued to stay wrong for over a decade. In our quest for facts and figures, we spoke to many concerned people who have over the years been associated with the KESC and with different governments. If we were to take our readers back to the year 1984, we could flip the pages of KESC's book and safely conclude that the organisation was running smoothly, it was profitable and power generation was ample.
The managing director was a Mr. Pervaiz Butt. The concept of load-shedding was non-existent and any breakdown would be attended and rectified in almost fifteen minutes only. The share price of the script was Rs87 per share. Today the share price is about Rs10. KESC then merged with WAPDA in the later half of 1984 during the Zia-ul-Haq's era of so called "Prosperity". The MD then was Syed Arshad Bokhari. WAPDA had administrative control of KESC and the financial health of the organisation was placed in the hands of the Federal Ministry of Finance. WAPDA and KESC shared a common chairman. That was the time when KESC had a very professional team of engineers and a very effective operation department. We were told that this was the time when slowly and steadily WAPDA started interfering into technical operations of KESC and many persons who were engineers and very capable professionals got dishearted and quit along with many others.
In the year 1994-1995 the balance sheet of KESC showed a Rs10 million profit, and workers were given a bonus also. (Pertinent to mention here, that today the terminology of "Profit" does not exist in the dictionary of KESC). It was around this time that the system of average billing was introduced by the then WAPDA\KESC chairman Tanzeem Hussain Naqvi. Due to this highly inefficient system of billing, KESC started suffering losses when the outstanding dues started rising. New electric connections were also stopped, people who had already paid and were waiting for connections had to forgo the loss of connection money. The biggest menace of all - the Kunda system came into existence as when new connections were stopped, the pilferage and theft of electricity started, and this continued unchecked. Today, there are about 10 lakh kundas operating in Karachi alone.
Around the time the generating plant in West Wharf was dismantled. The generating plant in Bin Qasim Thermal unit which was constructed by two Japanese companies, and had six units of 220 megawatts per unit had just been completed. The Japanese offered to install 400 megawatt of power generation unit in the West Wharf and also made concessions to receiving delayed payment from the KESC. But the offer was turned down, we are told that if this offer had been accepted, a plant would have today been functional in Karachi, the reasons for this refusal remain a mystery, or perhaps it was a long-time planning for Karachi to be dependent on WAPDA.
The duel fuel system in the SITE industrial area, which was a major requirement and had been set up in 1987, was also shut down. Shutting plants down one after the other area are inexcusable, the repercussions of which we are having to face today, in the form of loadshedding, breakdowns and ineffective, incompetent management of electricity.
Around this period, Karachi bade farewell to her self-generation capacity and the IPPs came into existence. Hubco, Gul Ahmed supplying 118 megawatt and Tapal with 110 megawatt. Karachi began to exist on electricity being generated and bought from different sources, while KESC was made "redundant" and crippled. The Kunda system gained such enormous proportions that 360 looms in the Orangi town were working on kunda - in simple language called stealing electricity. In the meantime furnace oil became more expensive, there was no tariff increase, no subsidy given by the government. Hence, the losses kept increasing. Big public sector organizations owed billions to KESC.
In 1996 some major decisions were taken in KESC, decisions which involved technical expertise, but bureaucratic decisions obviously over-ruled all others. The then MD of KESC Kamal Afsar did not manage to give 36 lakhs to restore the Korangi thermal power station which blew up killing two workers and injuring several others. Then came the era of the armed forces entering the organization. A brigadier who was advisor implementation introduced the system of recovery with commission. If one was to look at reports during that time we would come across many sections of the press reporting the unbecoming methods used for making people pay and those refusing to pay commission were humiliated, thrashed and taken to task, one such case was of businessmen Mohammad Hussain Mehnite. During the tenure of the two brigadiers, the trade and grade structure of the employees was not followed. One of them would hold a "darbar" in Bin Qasim and during one such sitting one of the foreman who had dared to stand and ask a question was reprimanded in such a tone that he fell and suffered a heart attack and died.
After the tenure of these two brigadiers, in 1999 Brig. Shahid Mukhtar Shah joined the set-up. We are told he was a very straightforward, enlightened and honest man and he tried his level best to root out the corruption taking place through the recovery with commission set-up. But unfortunately Brig. Mukhtar Shah was removed after only seven months. Then came the longest duration of an army personal, Brig Tariq Sardozai who was heading KESC till privatisation. During his tenure Rs13.68 billion grant was given by the government of Pakistan to KESC. We were told that the utilization of some of this fund was used for the distribution and implementation department for purchases of material. Here too, we found out that meters, which were installed in most of the houses in Karachi were purchased not once but twice at double or more the cost from Syed Bhai and company Lahore. It was during this period that the consumers had to face their meter being changed and a common agitation on the part of the consumer was that these meters installed in our homes are running at a greater speed then the ones installed before. (Probably to ensure a higher billing from the common tax paying rule-abiding residents of the city). A transformer was installed in Gadaff to make it a Kunda free area. A PMT of 50 K.V worth crores was put up, however the kunda electricity theft continued un-abated.
Come 30th November 2005 and KESC which had been looted and striped over and over was put up for privatization. It was given to Aziz Hammad-Al-Jumaiyah, Saudi builders with connection in Pakistan. Farooq Hassan of Hassan Associates was the person involved in Pakistan for the KESC bid along with quite a few others having strong connections in Islamabad. But these 'others' were faceless and nameless entities who have yet to come forward.
Perhaps, when KESC has a complete shut down we the masses would uncover these faces. KESC was privatized for 20 billion, out of which 5 billion was returned by the Privatization Commission to the group for re-structuring the organization. On day of privatization consumer outstanding was about 23 billion, 11 billion balance from the time of Tariq Sardozai of the grant given by government, 4 billion grant as Karachi package, from the government. So KESC had around 43 billion rupees at the time of privatization.
The operation and management of KESC was handed to Seimens Engineering Pakistan, which is being paid a fee to run KESC. The first year they were paid $9 million and the second year which is the current year $8 million is to be paid and onwards. There has been absolutely no accountability of this enormous sum being paid by the management and owners of KESC to Siemens. We can safely say here that this high sum is being paid for not providing electricity on a regular basis to the consumers and tax paying residents of this mega city. It is also pertinent to mention here that 5 billion was to be further invested by the buyers at the time of privatization.
However, this clause was not included in the agreement signed. Aziz Jumaiyah holds 71.5 per cent shares and he pledged to a Kuwaiti company Nasar Al-Mari about 23 per cent. This was at the rate of Rs4 per share, and shares were bought at Rs1.65. This question was raised at the AGM is 2006, but an answer was not received. Siemens enforced SAP computers which is their programme when they sold to KESC which was running on the oracle, but SAP has failed to even generate payroll as faults are being found, they are further wanting 2.5 billion to include the billing system in the programming.
The sense of all this dealing is not clear at all. If the government of Pakistan had decided to give Simmons the operation and management of KESC, then why did the need arise to privatise the state-owned entity at the cost of the residents of Karachi who have always been at the receiving end of every damage caused to the province, on the pretext of progress and prosperity. Our team has learned that Siemens has received a $118 million loan from a foreign bank and it plans to pledge the shares of KESC against the $118 million at an extra-ordinary meeting to be held at the Marriott on the 30th April 2007.
We were horrified to talk to many in KESC who did not want to be named and find out that the consumers of this city will continue to face loadshedding upto six times a day, shut-downs, line breakages due to no maintenance carried out by the privatised organization during the past 1-1/2 years. Our nightmare has begin, load-shedding even on a Sunday is unheard off, when all commercial buildings are shut. Blaming WAPDA or any other power house is a total sham.
The WAPDA chairman is on record of having said only a day ago that KESC is a defaulter and owes large sum of monies to WAPDA. Current Managing Director of KESC General Syed Mohammad Amjad should be prepared to face the tirade and onslaught by tired, sleepless, stressed and disturbed consumers of KESC in the city. He needs to hold many in the system accountable for their deeds and omissions.