Payments to KESC since privatisation: Finance ministry agrees to divulge details

The Finance Ministry has agreed to provide details of the amount paid to Karachi Electric Power Company (KESC) under all heads since its privatisation which insiders claim was more than Rs 100 billion. In 2005, the government privatised KESC. In the earlier part of 2008, Saudi group Al-Jomaih approached Abraaj Capital, a leading Dubai-based private equity firm based, with a proposal for a potential stake in KESC.
The deal was eventually finalised in October 2008 at a ticket price of $361 million for a significant equity stake in the company, which grants Abraaj Capital full management control. A senate panel headed by Shahi Syed expressed serious reservations over Ministries of Finance, Privatisation and Water and Power for giving undue favours to the power utility which violated Implementation Agreement (IA) and altered original agreement without taking the Privatisation Commission into confidence.
"We (politicians) are disgraced. KESC has given jobs to politicians' sons at hefty packages ranging between Rs 500,000 and Rs 2.5 million per month that is why they have closed their eyes," accused Senator Shahi Syed. He requested officials of Finance, Privatisation and Water and Power sitting in the meeting to favour the country not their jobs and reveal facts so that the committee could reach a conclusion.
Senators Humayun Khan Mandokhel and Nisar Muhmmad Khan raised queries over amendments in the original agreement without approval of Council of Common Interest (CCI) which is the competent forum. They criticised the Privatisation Commission for not opposing amendments signed between Saudi Al-Jomaih and Abraaj Capital, which was illegal.
"Why PC did not come into action when the Ministry of Water and Power or ECC approved amendments in the original agreement between Saudi Al-Jomaih and the government of Pakistan (GoP)," inquired Senator Mondokhel. He also asked what action the PC took against Al-Jomaih at the time of default. The representative of Privatisation Commission argued that the company was bleeding and privatisation was the only solution to stop wastage of national exchequer.
Official documents show that the total payable amount against KESC on marginal cost basis before the implementation of ECC decision taken on August 26, 2008 was Rs 71.976 billion. On October 14, 2008, the ECC decided modalities for adjustments/payments against NTDC receivables.
Details of payments set forth by ECC are as follows : (i) liability taken by GoP Rs 31 billion adjustable against the loan payable by Wapda/ Pepco; (ii) amount transferred to DISCOs & KESC Rs 13.635 billion; (iii) difference on account of marginal cost Rs 11.1 billion;(iv) difference of the reconciled and agreed payable arrears between NTDC & KESC ending 7-2008 was Rs 2.5 billion ;(v) net payable by KESC Rs 27.341 billion;(vi) upfront payment Rs 4 billion; and (vii) balance payable by KESC are Rs 23.341 billion. The panel directed the Finance Ministry to submit a report on the amount paid to KESC from national exchequer during 2005-08 and the balance liability.
A representative of Sui Southern Gas Company Limited (SSGC) apprised the committee that KESC owes Rs 46.4 billion of gas utility till February 2013 and the matter is in the court. SSGC is supplying 170 MMCFD gas to KESC. Average monthly billing is Rs 2-3 billion. "If we reduce or disconnect supply, KESC disconnects power to consumers," he added. According to him, SSGC is making all out efforts to strike Gas Sale Agreement (GSA) with KESC but the latter is reluctant to enter into any such agreement," he continued.