Federal government has provided multiform support including financial support amounting to Rs 72.232 billion to K-Electric (Karachi Electric Supply Company Ltd) since 2005.
This was revealed by a report of Sub-Committee on Water and Power. According to the report available with Business Recorder, implementation and obligations of KESC's Privatisation Agreements 2005 were fulfilled by private consortium under these agreements, (i) induction of new owner (Abraj Group) in KESC's Privatization through revised amended agreements 2009 without calling fresh pre-qualifications tendering and bidding and (ii) determination of role played by the concerned Ministries of Government of Pakistan.
The report further revealed that on the recommendation of that committee, the M/o Water and Power submitted another summary to ECC on 12-10-2008, in which it proposed that:- (i) Revised Amended Agreement and Shares Purchase Agreement 2009 may be signed with new Ibraj Group. (b) Total arrears on account of marginal cost differential against the KESCL of Rs: 71.976 Billion were set out by ECC as Rs: 3l billion liabilities taken by the government and Rs: 13.635 1billion were transferred to DISCOs. (c) the remaining amount of Rs 27.341 billion would be paid by KESCL in instalments. Further the government also taken liability to resolve the issue of Federal Board of Revenue (FBR)'s outstanding dues against the KESCL amounting to Rs: 321,733,000/-. Moreover NTDC submitted to this committee during a meeting in writing, "If KESCL was supplied 650 MW electricity at marginal cost basis instead of DISCOs rates, the advantages to the National Exchequer would have been approximately 110 Billion. This concession was not even allowed to KESC prior to its privatization in 2005 when the government owned and was holding 100% shares. This concession was against the objectives and terms of privatization of KESC.
The Report says "a Multiyear tariff for a period of seven years was granted to KESCL in 2005 and it was further extended up to 2016 only to facilitate the private owners of KESCL. After continuous failure of the private consortium since 2005, the Ministry of Water and Power and ECC should have cancelled the KESC Privatization bid and should have called new pre-qualifications-tendering and bidding as obligatory under the PPRA rules, instead of signing new RIA 2009 and giving them huge incentive based on bailout package.
Interestingly, all these decisions were being taken by the Ministry from the ECC without obtaining prior approval of the Cabinet or the Prime Minster. Under the Rules of Business 1973, it was obligatory on the M/o Water & Power to first bring it into the notice of the Prime Minister instead of directly submitting it to ECC rather it was domain of the Cabinet Committee on Privatization (CCOP) and the Privatization commission."
The report further revealed, "in 2010 Ibraj Group, unilaterally introduced Volunteer Separation Scheme (VSS) and declared 63 job roles as surplus and retrenched 4500 permanent employees and inducted approximately 10,000 fresh employees with attractive salaries and privileges.
Accordingly NEPRA allowed KESCL to charge at the rate of 15 paisa per unit from the consumers. This tariff is still being charged and the management was making billion of rupees at the cost of retention of old employees, who had actually been retrenched or declared surplus. All these actions were serious breach of terms, conditions and obligations of KESC's Privatization and violation of contractual agreements."
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