The billions of rupees worth dues of Karachi Electric Supply Company (KESC) owed to various organisations, plus the over Rs80 billion loans obtained by KESC from local and international agencies will be a huge liability for the government if the foreign management leaves the company.
“As KESC’s liabilities have swelled to over Rs160 billion for non-payment of dues and foreign loans, the government, under the Amendment Agreement, signed with the company in 2009, will be paying the dues and loans if the present management leaves the company,” sources told Profit.
According to the amended agreement’s new Article 8.6, ‘Government of Pakistan would pay all liabilities (past and future) of KESC’ in case of taking over the management of the company.
“KESC, which was privatised with zero liabilities by the government is now defaulting over Rs78 billion to various organisations including Wapda, SSGC, PSO, PTV, FBR etc. Besides it has obtained over Rs76 billions loans from local banking consortium and international loan giving agencies including Asian Development Bank so far,” they claimed.
KESC Share Holders Association in a statement has said that under the current financial positions, despite prolonged load shedding, average billing and other revenue generating tactics, the Abraaj Capital led management has brought KESC to such a disastrous position that it might leave the company in the near future.
“During the last three years of the privatisation of the company, dues of KESC have increased by almost 75 per cent besides the increase in load shedding and power crisis in the city,” it claimed.
“KESC currently owes at least Rs42 billion, Rs31 billion, Rs1.25 billion, Rs2.25 billion, Rs3.5 billion and Rs500 million to Wapda, SSGC, PSO, PTV, FBR and KANUP respectively,” it added. Though the government has provided every facility to the private management by amending the earlier agreement signed when the company was privatised in 2005, the foreign firm only focused on the earnings while forcing the company towards bankruptcy.
The “Amended Agreement” signed by Ministry of Water and Power KESC had also protected the public utility in increasing the tariff and other facilities it is enjoying. According to sources in another new Article 8.8 of the agreement, all payments of electricity supplied to the company by National Transmission and Dispatch Company Limited (NTDC) would be made by the government as the company shall have no obligation to make payment of amounts claimed by NTDC.
As support assistance to the company, the new Article 10.2 shows that government shall use its good offices to support and assist the company for insurance of such orders, certificates and documents which are not inconsistent with the laws of Pakistan. The support to KESC under the article were included the application to NEPRA by the company in connection with tariff, licenses etc.
The most interesting support the company sought and agreed by the government under this article was KESC’s obtaining of conclusive land title documents accurately showing the company’s right, title and interest in property owned by the company and obtaining easements, rights of way and rights of access to and through immovable property. KESC after the new agreement was signed had also demanded the government for resetting of transmission and distribution losses as the company had failed to decrease the T&D losses which it was agreed to bring down from 30 per cent, but it had jumped up to 34.2 per cent.
The demand for modification in the existing fuel cost adjustment mechanism for the time lag for the recovery of fuel cost as well as variation in the fuel mix were also approved by government in the agreement.
The other important facility government provided to the company was the deferral /suspension of existing claw-back mechanism for the seven year term, removal of efficiency factor in the O&M cost components and provision of new investment and capital expenditure.
For all practical purposes this company is bankrupt and should it should declare itself as such. It is incapable of paying back its huge loans. Why does the government insisting in trying to save a failed private company? Why should the taxpayers have to bear this burden? Since the power sector is in private hands, then competing electricity supply companies should be functioning in Karachi.They will not have any previous liabilities to hold them back to the job of supplying electricity effectively and charge reasonably.
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