The Chief Executive Officer of K-Electric (KE), Monnis Alvi, while speaking at the Korangi Association of Trade and Industry (KATI) this week, expressed his support for the entry of other electricity distribution companies to Karachi, stating that a healthy competition would foster an environment where performance could be fairly evaluated.
In the same breath, he said that K-Electric should not be restricted to Karachi and should be allowed to expand its operations to other cities across Pakistan as well. He reiterated that KE is not involved in the country’s circular debt issue, yet Karachi’s residents are forced to pay these additional charges.
He called upon the business community to join forces with KE to work towards eliminating such surcharges and raise these concerns with the government, Ministry of Energy, and power regulator Nepra. Alvi also discussed the company’s achievements in net metering; noting that KE’s performance in this area is among the best.
KATI management supported the idea of allowing other power companies to operate in Karachi to create competition and improve services for consumers. Korangi Industrial Zone, with a sanctioned power load of 600MW, is the largest industrial zone of Pakistan.
KATI acknowledged the KE’s significant role in supplying electricity to Karachi’s industrial sector. KE was praised for investing PKR 3 billion in improving the city’s power infrastructure, while also pointing out areas that require improvement.
KATI brought to KE’s notice that the current electricity cost of PKR 50 to 60 per unit is unsustainable for industries and that the Karachi consumers are being burdened with additional tariffs, including PHL charges, amounting to approximately PKR 5 per unit, despite having no role in the country’s circular debt.
The disclosure by K- electric Chief Executive that the company would welcome the competition to the city of Karachi and, on the other hand, KE wanted to expand its operations to other cities of Pakistan as well is a quite a teaser for some out of box thinking to salvage the messed-up power sector of Pakistan.
KE comes under public wrath, from time to time, notably at the time when the electric tariffs are hiked by the federal government or upon large scale power cuts in the city. Nevertheless, KE, a fully integrated power company, with power generation, transmission and distribution, has a success story to tell.
KE was privatized in 2005. At this time its T&D losses were at 34.2 percent, and within fifteen years, the losses reduced to 15.3 percent, more than half. To achieve this milestone the company is reported to have invested $4.1 billion in the value chain since privatization. KE has taken no operational subsidy since 2005.
The efficiency improvements made by KE have translated into an annual benefit of Rs170 billion in the form of a reduction in tariff, whereas the conversion of lost units into billed units has enhanced the national tax base with an annual impact of Rs13 billion. The number of KE consumers has increased from 1.8 million in 2006 to 3.4 million as of now.
The quantity of units sold has gone from approximately 8.4 Gigawatt hours (8.4 billion units) to 16.7 billion units. This expansion was achieved by the dedication of KE incentive based team of sales and marketing. There have been increase and improvements in the generation fleet.
The company is working on adding renewables to power generation mix. The plan is to increase renewable generation from the current 100 MW to 1,200 MW by 2030.
The other significant achievement is software-based customer services. The company has over 1 million customer accounts activated on digital touch points - app, Whatsapp and SMS platforms and 100,000 customers have already consented to switch to paperless bills.
The contrast between the delivery of the power sector in the public domain and that in the private domain is absolutely blatant. While the private sector in Pakistan has delivered efficiency, competence, more revenue to the government and good service to its consumers the public sector has delivered inefficiency, incompetence, circular debt and headaches to its consumers. The choice once again lies with the government the way it wants to go.
Pakistan’s neighboring country, India, inheriting the same electricity acts, customer base and consumer mindset as that of Pakistan, decided in early 90s to move its power sector from public to private.
The decision by the Government of the National Capital Territory (NCT) of Delhi to hand over the management of electricity distribution to private companies—specifically BSES Rajdhani Power Limited (BRPL), BSES Yamuna Power Limited (BYPL), and Tata Power Delhi Distribution Limited (TPDDL)—has been a significant move in the energy sector of India.
The privatization of electricity distribution in Delhi began in 2002 as a part of a larger reform aimed at improving the efficiency and reliability of power supply.
The three private distributors took over the management of power distribution from the erstwhile Delhi Vidyut Board (DVB). The primary goals of this privatization effort were to reduce system losses, improve customer service, ensure continuous power supply, and encourage investments in infrastructure.
The privatized companies operate under a regulatory framework established by the DERC, which sets tariffs and monitors their performance. The framework is designed to create a balance between the interests of the consumers and the service providers.
Since privatization, there has been a significant improvement in various parameters, including reduction in Aggregate Technical & Commercial (AT&C) losses, better billing efficiency, and investment in modern technology. For example, the AT&C losses, which were around 50-60% prior to privatization, have significantly decreased.
Same is the private sector success story in Mumbai and other main cities of India.
The very fact that the power sector of India, the third largest producer of electricity in the world, is powering one of the world’s largest industrial bases on the strength of the affordability and reliability of its power sector highlights the fact that its private power sector is efficiently trying to meet nation’s needs. On the other hand, however, the power sector of Pakistan is not serving the industry of Pakistan. The government needs to move from an inefficient public sector to an efficient private sector without any further loss of time.
Copyright Business Recorder, 2024
The writer is a former President, Overseas Investors Chamber of Commerce and Industry
Comments
Comments are closed.