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SEPTEMBER 2008

 

 

ISSUES:

 

 

 

 

 

The non-transparent KESC sale

 

The government has done it again. The KESC has been sold to a real estate developer. Can Pakistan afford another such (mis)adventure which may prove more costly and socially more disastrous? Apparently, care and transparency were not exercised in sale of public assets.


In July this year, the PPP government went whole hog after the owners of the KESC threatening to re-nationalise the utility by invoking certain clauses of the privatisation deal. The KESC was told to either get its house in order or be ready to face action (re-nationalisation). These threats were given by the Federal Minister for Water and Power, Raja Pervaiz Ashraf.


The previous management has left but the questions remain unanswered regarding the terms and conditions on which the new owners have been inducted. Similar questions were raised when the previous owners took over the utility in December 2005. No one answered the questions then, nor anyone is ready to respond now.


What happened to the three-year ban on the sale of KESC to any new buyer? What has the government, which is supposed to save Karachi from darkness and keep economic lifeline of the country intact, has done to ensure that the past mistakes are not repeated?


The Privatisation Commission sold KESC in December 2005 to a consortium comprising Saudi-based Al-Jomiah and Hassan Associates and the Siemens providing technical support. None of them had any previous experience in running a public utility. Siemens is manufacturer of electrical gadgets.

 

The consortium’s claims about the turnaround in KESC proved to be a hoax. The new buyer, “Al-Abraj,” according to its internet profile, is a land development company based in the UAE, again with no previous experience in running a power utility.

Can an investment company succeed, where one such investor has just failed? Can it be trusted once again? If it can be, as the PPP government seems to believe, on what basis? To begin with, 73 per cent shares of the KESC were sold at a rate of Rs1.65 per share – at a total cost of Rs15.86 billion – along with management to the previous buyer.


Under the so-called financial improvement plan, the government promised to invest Rs14 billion in next five years, bringing the de facto price down to a mere Rs1.86 billion. As an additional favour, the government reduced face value of KESC shares and total paid capital cost from Rs131 billion to a paltry Rs62 billion.


The government also wrote off Rs92 billion debts to the KESC before handing it over to the new buyer, and a dowry of Rs22 billion receivables from Karachites were given to the new owners – a cumulative loss or accommodation of Rs114 billion on this head alone.


Within weeks, the new owners sold 22 per cent shares to Kuwait Fund at a rate of Rs4.65 per share, thus recovering their own investment in one go. Then what happened to three-year ban on its sale?


Though the government did not make the “covenants of sale” public, the new CEO of the company, however, shed some light on them in his press conference. He pledged to invest $800 million to improve generation, transmission and distribution of the company in next three months (by February 2006).


When the power supply situation deteriorated in next few months, the government immediately transferred Rs14 billion to the KESC instead of forcing it to make its part of investment. Interestingly, no external audit of the amount has been conducted so far and no one knows where and how judiciously the money was spent. In addition to these Rs14 billion, the government also paid Rs30 billion in subsidy till June last and the KESC currently owes Rs60 billion to Pakistan Electric Power Company. If one adds cost of industrial loss, which the Karachi Chamber of Commerce and Industry puts at Rs400 billion, the magnitude of disaster that was wreaked on financial health of the economy becomes evident.


The power failure has also forced the industry to invest $2billion on power generation of its own, hugely affecting the import bill and hiking fuel import bill by $600 million, as per the KCCI claims. Instead of revisiting the entire privatisation process in the light of these huge damages, the PPP government seems to have chosen to complicate, rather than altering, the big picture. It never cared to make the sale and its terms and condition public, or re-nationalise the KESC or re-sell it through a credible process. It also failed to attract credible and experienced buyer through a strict pre-qualification process. No one knows what the new owners are supposed to do and what would be the timeframe to bring improvement in service. The government has already paid a huge cost of “non-professional” management of the previous owners. It is not known if the government has ensured that the new owners are professionally competent enough to run the utility – improve generation, transmission, distribution and revenue collection.


Does the new purchase agreement include timeframe for such improvements and very stringent rules and regulations to achieve them? And what about a vigilant watchdog to ensure on-time implementation of agreed covenant? Moreover, does the new sale agreement include the condition that assets of the company would not be used for any purpose but for system augmentation? All other terms and conditions should also be made public by the government to escape the allegations that it has been levelling against the previous government – cronyism, corruption and existence of a nexus between sellers and buyers.

(By Ahmad Fraz Khan, Dawn-Economic & Business Review, Page-IV, 29/09/2008)

 

 

 

 

 

Power shocks daze Karachi; KESC allowed to raise tariff

 

At a time when people in Karachi have to endure long hours of loadshedding, in some areas for up to 12 hours, the financial managers of the country have decided to pass on the full impact of high oil prices in the international market to them.


The old regime did not allow an increase of more than five per cent in consumer tariff as a result of change in fuel price. A meeting of the Economic Coordination Committee (ECC) of the cabinet, presided over by Finance Minister Syed Naveed Qamar, removed this cap, allowing the passing on of the entire increase in oil prices to consumers.


The ECC meeting also decided to treat the KESC at par with distribution companies of Water and Power Development Authority (Wapda) so that the National Transmission and Dispatch Company (NTDC) charged the same power purchase rates from the KESC as the distribution companies of Wapda.


Under the existing arrangement, the NTDC sells about 750MW of electricity to the KESC at about Rs10 per unit compared with Rs3.70 per unit from Wapda’s distribution companies on the grounds that the Karachi utility company was not an integrated entity of Wapda. The decisions have been allowed on the recommendations of a ministerial committee and demands of KESC’s foreign management to reduce its financial pressure. Now, the KESC will be able to recover full financial cost of fuel oil from consumers while its power purchase cost would drop by more than 40 per cent.


On 26
th August, the KESC was getting about 500MW from Pakistan Electric Power Company (Pepco) and another 210MW from other producers. The megacity requires over 2,200MW.


However, due to the non-functioning of two units of the Bin Qasim thermal power plant and one unit of the Korangi power thermal station, the utility has been producing only 600MW on its own. It has not been getting any supply from the Karachi Nuclear Power Plant since Aug 22.


The government seems to be unconcerned about the problem, as there seems to be no intervention from its side to protect the consumers. Analysts say the only intervention has been to the advantage of the privatised management in the form of an increase in tariff. Some sources go to the extent of saying that the utility’s management was closing down different units to blackmail the government into enhancing tariff, and to pay its outstanding dues to the gas and oil companies and Pepco and Wapda.


Representatives of trade and business organisations have criticised the indifferent attitude of the authorities as well as of the KESC management.

(Dawn-1, 27/08/2008)

 

 

 

 

Will the KESC’s new management be able to deliver?


The residents of Karachi were greeted with up to eight hours of power load-shedding, despite news about a new Karachi Electric Supply Company (KESC) management which promises to curb the load-shedding malaise.


The aggrieved citizens have no clue as to what magic the new KESC managers from the private sector will employ to reduce the instances of load-shedding to a maximum two-to-three hours as per the announcement of the technical team of Ministry of Water and Power that visited the city on Monday on an emergency basis to review the situation of the raging power crisis.


There has been no end to the continuous cycles of two-hour load-shedding till Iftar despite the weather conditions in the city turning relatively milder with the mercury dropping to 35 degrees Centigrade.


In all there have been at least four spells of load-shedding during 24 hours and in addition several localities came under overly prolonged power failures due to tripping in the heavily overloaded power transmission and distribution systems.


The shut-down of the Defence Cogen desalination plant and Karachi Nuclear Power Plant (KANUPP)has been the major contributory factor towards much widened shortfall of electricity faced by the KESC.


The generation units of Bin Qasim Thermal Power Station of the KESC have been working on a much lowered capacity. In the last couple of days the KESC had faced 500 Megawatts and more record electricity shortfall in meeting demand of power supply in the city.


Meanwhile, the KESC formally announced appointment of Naveed Ismail as the new chief executive officer of the power utility as per the decision of the KESC board. Naveed Ismail is backed by a new leadership team of over 40 senior managers tasked with the objective of transforming the Karachi’s sole power provider, said a KESC statement. “These world-class professional will be supplemented key management personnel already in place at the KESC who will be retained and integrated into the team,” said the statement.


“The new leadership team and 17,000-strong hard working, devoted talent pool at the KESC will Inshallah combine to meet the challenge of taking this company forward with crucial investment required,” said the new CEO, Naveed Ismail, who has almost 20 years of operational leadership experience in utilities of power generation, distribution, and transmission, and managing people issues in large companies.


“We will work together with the people of Karachi and its key stakeholders to transform KESC’s performance into that of a world class operator. This will require hard work, determination, and patience from all of us,” he said.


Jalil Tarin, with 40-year experience in finance and auditing in large public sector and newly-privatised companies has taken over as group chief financial officer of the KESC. He was previously executive-director for finance and IT at the Pakistan State Oil.


Zafar Osmani, who was a member of managing committee at the Habib Bank, has assumed as group human resource director at the KESC.


Dale Sinkler has taken over chief operating officer, Generation and Transmission, of the KESC. He had worked in the power industry for 20 years and brings with him a team composed of various technical experts.


Syed Jan Abbas Zaidi, with 15 years of experience of restructuring of power utilities, has assumed as chief operating officer distribution of the power utility.


The quarters concerned believe that authorities in Islamabad and regulatory agencies have to maintain a strict check and monitoring of the functioning of privatised KESC with its new owners and operators so that it would be able to overcome the prevailing power crisis which has agonised the residents of Karachi.

(The News-17/09/2008)

 

 

Countrywide deficit surges to 4,500MW

 

The severe power shortage in the country surged to over 4,500 megawatts when saboteurs blew up gas pipelines, causing suspension of supplies from Zamzama and Pir Koh to some power plants and forcing Pakistan Electric Power Company (Pepco) to undertake ‘unannounced’ loadshedding.


According to Pepco officials, the crisis hit the 1,326MW Muzaffargarh Power House, which was producing only 550MW — a loss of 776MW. Similarly, the 1,250MW Kot Addu Power Company was producing only 800MW, with a net loss of 450MW. The Faisalabad Gas Turbine Power Station, designed to produce 170MW, remained shut, and so was the 200MW rental power unit.


The company was getting only 50 per cent of its share of gas, according to Pepco’s director-general Tahir Basharat Cheema. “Pir Koh and Zamzama gas fields are offline, plunging the company in a real crunch.”


He said the situation would improve in the first week of September after Mangla Dam got filled and the run of the river increased.


Currently, Mangla Dam is generating only 350MW compared to 1,050MW produced last year. The Indus River System Authority (Irsa) was releasing only 10,000 cusecs, saving almost the same amount of water. The lake level is three feet below its optimum level of 1,202 feet.


On 26th August, hydel generation remained around 5,600MW against the maximum possible generation of 6,600MW. The extent of the crisis could be gauged from the fact that the company did not have enough fuel to restart even a unit of the Muzaffargarh Power House, another company official said.


“The situation at the company’s own thermal units is also messy. On Tuesday, all of them contributed only 2,000MW against 2,800MW when the oil supply situation was better.”


According to him, the company was facing a crisis in all three sources of generation — oil, water and gas. “It does not have sufficient oil because of the price factor and liquidity crunch. It does not have enough gas as a result of sabotage and because water releases are below normal owing to preference for irrigation.”


According to a Pepco press release, the pipeline supplying gas to the Sui Northern Gas Pipelines Limited (SNGPL) from the Zamzama gas field was blown up by saboteurs a couple of days ago, affecting gas supply to the Muzaffargarh Power House, Kot Addu Power Company and Faisalabad Gas Turbine Power Station.


There was an additional shortfall of about 1,000MW in the national grid because power houses were running below their capacity due to reduced gas supply.


“Under these circumstances, Pepco has to resort to forced loadsheding in a few areas. Resultantly, consumers have been facing loadsheding of relatively long hours than normal load management schedules.


“Necessary measures are being taken … to rectify the problem. It is expected that the situation will normalise by Wednesday.”

(By Ahmad Faraz Khan, Dawn-1, 27/08/2008)

 

 

 

 

Private schools seek free hand in fee-hike

 

While most of the private schools in the city have already increased their tuition fee without permission, supposed to be taken from the authorities concerned, managements of various other private schools are making hectic efforts to get a free hand in this regard. Private schools are under obligation under the rules and regulations laid down by the education department not to increase the tuition fee without the mandatory permission from the competent authority.


Representatives of the private schools’ associations have been approaching the authorities concerned in the education department and other quarters to get the condition of permission waived, allowing management of every private school to fix its fee at its whim.


The lobbies active to achieve the goal are using the pretext of price-hike and inflation, as well as the enhanced scrutiny and recognition fees being charged by the Board of Secondary Education Karachi (BSEK), to make their case.


Sources in the Sindh education department’s directorate of private institutions said that private school were authorised to increase tuition fee by five per cent per annum at the start of an academic year.


However, they observed, managements of various private schools, individually or through the All-Private Schools Management Association (APSMA), Sindh, had constantly been pressuring the directorate to allow them a free hand in this regard. They intended to raise the tuition fee by 15 per cent at this stage, the sources said, adding that they wanted the condition of seeking prior permission for the purpose waived.


According to the sources, APSMA, Sindh, proposes that the provincial education department should allow a 15 per cent increase in tuition fee without seeking permission from any authority and that the clause of permission should apply only to those schools seeking an increase of more than 15 per cent.


APSMA chairman Syed Khalid Shah, asked to comment, said that the prevailing wave of inflation had pushed managements of private schools into a deep financial crisis. Expenditures being incurred in water, power, gas, salaries, etc, had gone up exorbitantly while the boards had also increased scrutiny and recognition fees. “There is no other option for us but to cover these expenses through fees to come out of the crisis,” he argued.


He pointed out that owners of the buildings housing private schools had also raised monthly/annual rate manifold over the past few years.


Although the inflation was estimated to have gone up to 35-40 per cent during the current year alone, the association was seeking no more than 15 per cent increase in the tuition fee, realizing that students from lower and middle class families would not be able to afford an unrealistic increase.


He argued that it was becoming increasingly difficult for managements of private schools’ to ensure quality education while suffering losses on account of rising inflation and growing expenses.

(By Azizullah Sharif, Dawn-14, 25/08/2008)

 

 

 

Plastic recycling poses risk to citizens’ health

 

A large number of factories associated with the informal recycling industry in the city burn plastic in residential areas and release hazardous fumes into the air.


While the people worst affected by the burning of tons of plastic every day are the workforce employed at such factories – where no protective gear is employed – the fumes released into the air are said to cause respiratory disorders among the residents of the neighbourhood.


And yet no study has been carried out by the provincial protection environment protection agency to find out what impact the presence of such factories in the city’s residential areas have on not only the health of the residents but also on the environment.


This reporter paid visits to a couple of such factories in the city and learnt that polythene bags of various sizes and colours are acquired from garbage-pickers, mostly Afghan boys, who are paid by the kilo either by the factories or by the person they work for. The scavengers receive around Rs3 for a kilo of plastic bags collected by them. The amount is paid either directly to them or to their families when they return home after working in the city for a couple of months.


The polythene bags thus collected are then sorted out. The ones that are used as shopping bags are separated from the ones used in packaging. The bags are then made to pass through various locally manufactured machines which melt plastic and then turn it first into vermicelli-like sticks and then into granules. These granules are then sold to factories in Korangi and Shershah where plastic goods and polythene bags are again made from them.


This reporter saw workmen in one such factory in Shireen Jinnah Colony handle red-hot molten plastic with bare hands. When the owner of the factory, where around 250 kilos of plastic is melted every day, was asked as to why no protective gear is made available to the workers, he said the 15 labourers working in his small-time establishment were too poor to worry about environmental issues and even their own health.

 

He said that he obtains plastic from a contractor, who in turn employs boys that collect refuse all over the city. (The sorting out of the garbage – plastic, paper and iron – takes place at the contractor’s place.) He said the rate at which he bought plastic from the contractor ranged between Rs15 a kilo to Rs25 a kilo – depending on its thickness and quality. He sold the granules produced at his factory after adding around Rs7 production cost and Rs4-Rs5 per kilo profit. He insisted that the fumes rising from his factory posed no health risk to the residents of the locality.


However, Dr Moazzam Ali Khan of the Institute of Environment Studies, Karachi University, told this reporter that dioxin, which is highly carcinogenic, is released into the air when plastic is burnt. “Such factories, if they must be established, should be located 20 to 25 kilometres away from the city. The fumes released by plastic burning should not be allowed to escape into the air.” He said that in the civilised world there was a ban on burning plastic openly. When the Director-General of the Sindh Environment Protection Agency, Dr Mohammad Ali Shaikh, was asked to comment on the recycling of plastic by burning, he said he had no knowledge on the subject. “I know hardly anything about it. I am new to the department and since my takeover I have been busy with a project on noise pollution.” However, the Sepa Deputy Director, Naeem Mughal, told this reporter that no research had been conducted by Sepa on such plastic recycling. “We are unable to do it because we are short-staffed and face financial constraints. Therefore, we focus only on large industries and factories.” He said that out of the 8,000 to 10,000 tonnes of solid waste generated by the city every day, only 30 to 40 per cent is collected and disposed of by the city government. The rest of the garbage is collected by pickers who sell it to the informal recycling industry.

(By Meera Jamal, Dawn-17, 26/08/2008)

 

 

 

 

Solid waste Project put on hold

 

The city government’s plans went awry when it emerged on Thursday that the Chinese firm that was supposed to meet the deadline of launching a crucial solid waste management project in four towns on the Independence Day would not be able to do so any time soon.


Sources close to the city government told Dawn that the project had been put on hold indefinitely.


This is the fourth time that the deadline of initiating the key solid waste management project has not been met.


The Chinese firm, Shanghai Shen Gong Environmental Protection Company Limited, had won the contract of integrated municipal solid waste and hospital hazardous waste management project and signed an agreement with the city government in January this year under which the collection and disposal of solid waste would be its responsibility for a period of 20 years and it would get $20 for lifting and disposal of per ton garbage.


The firm got registered with the Securities Exchange Commission of Pakistan after forming another company, Pak S.S.K Environment & Energy Development Company Ltd, to start operations in Karachi and promised the city government that the project would get off the ground initially in Saddar, Jamshed, Gulshan-i-Iqbal and Liaquatabad towns from Aug 14.


Well-placed sources told Dawn that the Chinese were extremely concerned about the overall political situation in the country and it was also one of the many reasons behind the delay in the taking over of the city’s solid waste management.


The sources said that the Chinese firm was reluctant to invest here under the agreement due to the fragile political and economic situation of the country. The sources said that the company also failed to bring required machinery and vehicles for garbage lifting on time and just a couple of days back it had informed the city government about its inability to start garbage lifting.


They said that instead of bringing 100 machines to be used in the garbage collection process, the Chinese brought here only five machines and, therefore, the city government did not allow the commencement of operations in four towns.


The sources said that at a recent meeting, the Karachi district coordination officer opposed launching of operations by the Chinese firm from Aug 14 because he believed that the project would fail in the absence of the required machinery that the Chinese firm had promised to bring. While the Chinese firm sought more time and promised to the city government that it would bring the required machinery within days to the city, no new deadline was set.


The Executive District Officer of the city government’s municipal services department, Masood Alam, told Dawn that the Chinese firm could not launch its operations from Aug 14 due to some “technical reasons” and it would take some more days to initiate the operations.


Sources close to Karachi Nazim Mustafa Kamal said that there was no plan to scrap the agreement between the Chinese firm and the city government.


“At the time of the agreement (in January), one dollar traded at Rs60 and the diesel price was Rs35 a litre. Despite a surge in diesel prices and continuing rupee depreciation against the dollar, the city government does not want to scrap the agreement because it is in the interest of the city and its citizens,” said a source.


The Chinese firm was first supposed to take over the city’s solid waste management on April 1. No representative of the firm was available to offer comment. According to the agreement signed on January 11, the Chinese firm is responsible for door-to-door collection of solid waste from all residential and industrial areas of the city and its disposal on designated landfill sites. The city government will pay $20 per ton to the company for lifting and disposal of garbage. However, the city government will share 15 per cent of the total income, to be generated by the company through recycling of the waste.

(By Azfar-ul-Ashfaque, Dawn-15, 15/08/2008)

 

 

 

 

700,000 displaced so far: HRCP


The Human Rights Commission of Pakistan on Wednesday said that more than 700,000 persons had been displaced so far owing to US attacks in the Bajaur Agency as well as violence in parts of the North West Frontier Province (NWFP) particularly Swat.


Taking serious notice of the atrocities inflicted on the people of FATA, NWFP and Balochistan, HRCP co-chairman Iqbal Haider said that “the battle against extremism cannot be won by indiscriminate killings of the civilians, but by political solutions backed by a public consensus.”


Haider demanded that the present elected government “must undo the policies of Musharraf’s government and return the peace that prevailed in the 70s in the country, before it was cursed with General Zia-ul-Haq’s dictatorial policies.” He was addressing a press conference.


The HRCP condemned the more than 2,000 civilians deaths that have been reported since 2007. “This is an unjust war ongoing for the past six years with tragic human consequences and is an attack on our sovereignty,” commented Abira Ashraf, a lawyer and member of Peoples Resistance, an NGO. Mohammad Arif, a refugee from Barabanday village in Swat was also present at the conference.


Narrating his ordeal, Arif said he escaped from Swat without any luggage to seek refuge at a relative’s in Karachi. “Since my relatives have a big family of their own, I have been sleeping on the roof of their house and am looking for a place.” He disclosed that some 600 to 700 families have been displaced from his village. “The government planes have been targeting schools and houses of locals. We are not the Taliban,” he said.


“It is shameful that the US first bred these terrorists and now they want to eliminate them at the cost of innocent lives,” said Haider. He argued that the US government was determined to encourage terrorism, not curb it and that it intends to “destroy Muslim populations across the world.” Haider asked “How can the US keep a close eye at the Iranian nuclear program and their day-to-day dealings but not check the proliferation of arms in this region.”


The Swat refugee further condemned the religious parties for remaining silent on the recent spate of suicide bombings across the country, which were being done in the name of Islam. “If religious parties can condemn US attacks on civilians, why do they adopt a criminal silence when innocent civilians are killed in suicide attacks?” he Asked, urging the government to de- weaponise the militants first and then engage in dialogue through a campaign, not drop bombs on civilians.


A protest against the killings in Bajaur, Swat and Waziristan will also be organised outside the Karachi Press Club, September 20, the meeting was told.

(The News, 18/09/2008)