It is highly unfortunate that instead of taking swift action against workers found involved in the ransacking of the corporate office of Karachi Electric Supply Company, Sindh's two major parties - PPP and MQM - have chosen to side with them. This must be an ugly reminder to the major private sector employers and investors of the happenings of the early 1970s when the PPP government took charge after the break-up of Pakistan.
The nationalisation policy under Zulfiqar Ali Bhutto was reversed, albeit half-heartedly, 18 years later by his daughter Benazir Bhutto. But real progress towards privatisation in earnest started in the early 1990s under the watch of Nawaz Sharif. Mistakes were made under the sole criterion 'public sector units would be sold to the highest bidder' in the absence of due diligence of the financial and management expertise of the intended buyers.
In few cases such as Zeal Pak Cement; Metropolitan Steel, National Fibre and Pak-China Fertiliser were sold to business groups who could not efficiently manage them. Drawing lessons from the pitfalls of nationalisation policy, Pervez Musharraf/Shaukat Aziz government introduced the pre-qualification exercise of bidders, making it mandatory that only qualified groups can participate in the bidding process.
The sale of KESC to Al-Joomiah of Saudi Arabia was clearly and unambiguously in contravention of the laid down pre-qualification process as federal government was getting impatient in attracting the right kind of buyers equipped with the required expertise of transmission, distribution and generation of electricity and the financial strength to spend one billion dollars to put the Karachi-based monopoly back on rails.
The then President, Pervez Musharraf, angrily brushed off the then Naib Nazim Nasreen Jalil's legitimate concerns about this deal. The Saudi buyers failed to run the company because of their flawed business model: they chose to first earn from the acquired entity and use those earnings for capital expenditure! This was not a realistic option.
KESC was facing nearly fifty percent in line losses and was unable to collect electricity charges from government-managed entities. In addition to these factors, rampant theft and bloated workforce were immensely contributing to company's slide. They rightly chose to get out and sell KESC to a UAE-based Private Equity firm Abraj Group. Had the group not been headed by Arif Naqvi - a Karachiite having the interest in city of his birth close to his heart - Abraj would have invested in less challenging environs.
Public sector companies are sold to private sector with a view to improving the profitability of these businesses through efficiency in operations and obtaining a higher level of accountability to shareholders who yearn for a good dividend pay-out. Private companies are not employment exchanges and they undertake corporate social responsibilities from their profits and not from their sales proceeds.
They also pay taxes to the state whose responsibility is to provide them protection against lawlessness and also create the enabling environment for them to flourish. As they grow they generate additional employment and pay more taxes. Utilities by nature generally operate as monopolies - therefore they are regulated by their respective regulators. KESC offered a Voluntary Separation Scheme (VSS) to right-size the company.
Those who did not opt for VSS were given a golden handshake with minimum payment of Rs 700,000. Some non-core activities may be outsourced to lower cost and raise efficiency. And, the company must have followed the law which allows them to do so. In the late 1990s, two major banks - HBL and NBP - chose to prune their workforce. At the same time UBL chose Golden Handshake Scheme (GHS) to lay off officers on the basis of "last-in-first-out" in every grade. UBL management's decision was upheld by the Supreme Court.
KESC employees being 'pink-slipped' can freely move the court if the company acted in violation of law. Unfortunately, however, almost all political parties have their student and labour wings. Outside interference in universities/colleges is responsible for the slide in our education standards. Same holds true for labour unions as productivity in Pakistan is one of the lowest in the world. In the case of Pakistan in particular, unions always offer resistance to new work processes that are geared towards increasing efficiency and productivity.
The political pressure from both parties sends a wrong signal to all employers - both foreign and local. KESC must be allowed to restructure without outside interference. They must have protection if the investment being undertaken to improve transmission, distribution and generation is to produce good results. It is sad that the protesting workers were found unlawfully occupying the KESC's Gizri-located building through sheer brute force.
The situation underscores the need for some prompt actions on the part of the government. People involved in acts of violence must be punished to send a strong signal across that hooliganism will not be tolerated in any case. Playing populist politics and brow-beating KESC management are a sure recipe for darkness in Karachi.
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