EDITORIAL: The government has come to its senses at long last and settled its disputes with K-Electric (KE) Ltd, the country’s only private and vertically-integrated electricity provider.
A sceptic might say, the settlement is a day late and a dollar short, considering that the four agreements between K-Electric and government entities received the seal of approval by the federal government three years after their finalisation. But as chronic optimists let’s chalk it up to the institutional inertia that traditionally pervades our public sector.
The signing of power purchase agency, interconnection, tariff differential subsidy and mediation agreements should, hopefully, bring some solace to the foreign investors of K-Electric for they have suffered the apathy of our national polity long enough.
Notwithstanding the recent losses owing to external factors, post-privatisation K-Electric has been an anomaly in the country’s power sector. From a corruption-riddled power utility totally dependent on the federal government’s handouts to a well organised private-sector player that has successfully reduced its system losses and ploughed back its earnings into the business, K-Electric has been an all-round success story.
There are many lessons to be learned here. Kudos to the foreign investors for staying put and not storming out of the country in the face of an utter lack of professionalism exhibited by successive governments.
Which government worth its salt lets a power purchase agreement expire with the company that is supposed to electrify the biggest city of the world’s fifth most populous country? The bureaucracy here is lethargic and winds up slowing down everything it comes in contact with.
The absence of skin in the game for our pampered bureaucrats, coupled with the short-sightedness of our politicians bent on escaping accountability, has messed up the economy. Consider this: the government has delayed the promised subsidies to K-Electric while K-Electric has withheld the payment of principal amount to be paid as the cost of electricity it received from the national grid.
Reconciling receivables and payables leaves a hole of about Rs20 billion, which is small change given that the build-up of these two items runs into hundreds of billions of rupees on the books of each party.
The agreements to resolve the ‘disputes’ — if the lack of initiative can be called so — were ready to be signed years ago. But no government was willing to bell the cat. From accountability bodies to judicial overreach, decision-makers have had multiple swords of Damocles hanging over their heads.
We tip our proverbial hat to the energy and finance ministers in the interim government for stepping up to the plate. Some people have attributed their decisiveness to the full backing of the establishment.
Perhaps they have received assurances that they won’t find themselves at the short end of the stick once their term at the helm ends. Or maybe the decision-makers plainly did what they thought was the right thing to do without worrying about personal consequences. In either case, their boldness in getting the long-festering issues between K-Electric and government entities settled is commendable.
The move will send a positive signal to foreign investors that the government is keen to induct in the energy sector. The state-controlled power distribution segment is replete with inefficiencies. The long-term solution to the woes of the power sector in general, and distribution companies in particular, lies in privatisation.
What the overseas sponsors of K-Electric have suffered so far doesn’t really make Pakistan a poster boy for foreign investment. We hope the recent developments help pave the way for the eventual takeover of K-Electric by Shanghai Electric and set a precedent for other power distribution companies.
Copyright Business Recorder, 2023
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