The Privatisation Commission (PC) deserves the gratitude of this nation to have finally succeeded in advancing the process of KESC's privatisation by convincing the second highest bidder to match the price offered by the highest bidder who forfeited his security deposit and ran away.
One wonders if the actual handover to the new buyers would take place as promised because they have yet to pay a certain amount by the end of this month. The transfer would be a great setback to the organisation, the largest government employer, which has been availing it of job opportunities for the retiring and the retired. On the other hand, the day would be of rejoicing for the people of Karachi as soon as the management is transferred because they have suffered at the hands on incompetent and dishonest management all these years.
The performance of the Privatisation Commission headed by Dr Abdul Hafeez Sheikh has indeed been impressive. Privatisation of the KESC has been on the cards for at least last 15 years and we had been paying in dollars to the consultants all these years.
PC before Mr Sheikh assumed charge was an inept and inefficient organization and was always in the news for the wrong reasons. The process of privatisation has been fast indeed because the government chose the right person for this job. What difference does a good choice as the captain of ship make? Privatisation of the KESC will be the crowning success of the PC.
There was a time when one of his predecessors from Sialkot, while chairing a meeting organised with great fanfare and elaborate arrangements that go with it including lunch lost his cool when asked to give a firm date for privatisation. The consultants were going in circles with charts and all.
Only if the management improved and investment climate changed, it was argued the utility could be easily privatised. PC was officially told by the Ministry of Water and Power that the prospect of privatisation under his sterling stewardship being very dim, the Commission should at least save on huge foreign exchange being paid to the consultants in the name of fast track privatisation. His anger knew no bounds.
The highest bid per share accepted by the PC for 73% shares of the KESC is Rs 1.65 against the face value of Rs 10. The PC reference price was Rs 1.32 per share. That reflects brilliantly on the performance of the military management over the last seven years and its civilian predecessors before that. The new buyers are Hasan Associates who had originally offered Rs 1.01. Kanooz Al- Waten had offered the highest price involving a total payment of Rs 20.24 billion.
That is roughly twice the subsidy the taxpayer sinks every year into the bottomless pit of the KESC, as a reward for the managers of the utility for their crass failure. The government has been paying heavily to sustain this white elephant. It paid Rs 8 billion in 2002-03, 12 billion in 203-04and 23 billion in the current financial year. This is not counting previous injections in the name of equity.
Hasan Associates has associated Aljoomiah----a Saudi Group----as a leading investors, who will hand over the operation and management of KESC to M/s. Siemens. There were reports that the major original partner of Hasan Associates (AKD Group) is no more part of the consortium. It has been replaced by Aljoomiah. Had the Federal Cabinet not approved the change in the bidders consortium. It might have unravelled the entire effort leaving the management of the utility going laughing all the way to the Ministry of Finance, for their next reward for their abysmal failure.
In the last fiscal year, KESC suffered a shortfall of Rs 7 billion according to the data released by the Ministry of Finance. Total income was Rs 47bn as against the expenditure of Rs 55bn yielding a loss of Rs 8.1 bn. Rs 1.3 bn has been paid by the Government as a grant. There are strong indicators that the management has heavily fudged the figures. Cost of the fuel is argued as the factor for the state of affairs but that is a recent phenomenon. They have been trying to sink the KESC since 1999.
One single credit this government, by-product of constitutional aberration, deserves is for its sincere effort to privatise KESC. There are those who believe all privatisation is bad having been thrust on us by advocates of market economy. There have been few statements of opposition leaders criticising the government either on account of privatisation per se or for getting a lower price. One opposition Senator warned of dire repercussions of government's blind and over aggressive privatisation policy. He termed the utility as a strategic institution.
He saw a role of foreign funding agencies in the process because they wanted to make Pakistan "a honey lake". The leader of the opposition in the Senate went so far as to say that privatisation of a strategic unit like KESC would hurt country's integrity, as it was responsible for power supply to some sensitive institutions like KANUP etc.
The loss of jobs was another fear. Isn't it time we stopped using the term 'strategic' after we got egg all over our face while trying to seek 'strategic depth' in Afghanistan. As for the honourable members opposing the sale of KESC, one can only say they know not what they say.
Other political leaders are not so averse to the policy of transferring non-profitable units. One such leader suggested that a better price could have been obtained if the government had arranged its deck of cards right. May be but that is easier said than done.
Be that as it may, there is no quarrel with the thesis that KESC was bottomless pit, a black hole, a sieve that jeopardised the taxpayer and hurt the consumer. The latter had to suffer frequent breakdowns and routine shut downs. The utility's decline started when General Ziaul Haq handed over its control to WAPDA and the process of militarization began. It reached it denouement during the last civilian rule, when they inducted military administration in the mistaken belief that bluster and management were synonymous.
According to former General/Chairman WAPDA/Kesc the line losses of the latter had hit 40% and his vigorous efforts had brought them down a little. He had promised to the then Prime Minister a turn around in two years only if he was given him a chance. He was given four years. That the utility is in much worse shape is a tribute to the intelligence of the rulers who believed such promises.
There is a vested interest of the present management working in KESC not to let go the utility out of their hands. Common interest makes strange bedfellows. It has put the management in the same company as the workers who consider any privatisation as the greatest disaster to befall them. Although the utilities are on the agenda of foreign lending agencies for privatisation but it is in our own national interest to manage our assets well. And this simply cannot happen in public sector, which has become notoriously corrupt and incompetent, mainly because our choice of personnel guided by personal whims of the rulers. We do not differentiate between personal and personnel. It is to be understood that the military cannot manage utilities because it has been trained only to fight wars.
With the hoped for privatisation it is expected that the management will improve, cut unnecessary fat, remedy chronic maladies, reduce transmission losses, strengthen infrastructure and assure regular uninterrupted supply of electricity. This is the utility, which could in good conscience be handed over to a good management even for free. The purpose of privatisation is to induct good and capable management and attract much needed investment. Both are likely to follow privatisation. People of Karachi have suffered long and hard at the hands of incompetent and insensitive management. It is high time they saw some relief.
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