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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 26th 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)
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