EDITORIAL: National Electric Power Regulatory Authority (Nepra) is to hold a public hearing on 21 September to consider its proposal to end K-Electric's exclusivity over Karachi. The argument in favour of this proposal is that this would encourage competition in the sector which would benefit consumers, the prime objective of privatization today as opposed to the time when K-Electric was privatized, while those against this proposal point out, equally validly, that this would effectively end Shanghai Electric Power's (SEP's) interest in purchasing K-Electric. The "knee-jerk" Nepra proposal will not only jeopardize the utility's long and medium-term investment plans but also undermine the possible acquisition of K-Electric by SEP. The performance of K-Electric has been criticized as being far below par in recent years with allegations of over-billing, massive load- shedding and continued reliance on the national grid to provide electricity to meet the city's growing demand as well as receiving annual subsidy under the tariff differential formula (state support not associated with a private sector company today). The electricity breakdowns and absence of power supply for long periods during the unprecedented heavy rains resulted in a suo motu notice by the honourable Supreme Court and the reported assertion by the learned attorney general for Pakistan, implying that the monopoly status of the utility may well be the main problem prompted the Supreme Court to order a performance audit of the utility and for Nepra to revisit the exclusivity clause in the agreement with the power distribution utility in Karachi.
The exclusivity to KE for distribution of power in its service area is to expire in 2023 under the agreement with the government of Pakistan. A unilateral revocation of this status barely three years before its expiry makes little sense considering that it would set a dangerous precedence, jeopardize the utilities operational plans, shake investor confidence, impair its performance and compromise service delivery to consumers.
Furthermore, revocation of the exclusivity clause would only result in new entrants in power generation and not in transmission and distribution. The new entrants would therefore use the KE network for transmission and distribution to 'wheel' their generated power. As matters stand today, the country is surplus in power generation and deficient in transmission and distribution. The existing transmission and distribution network too needs to be replaced and upgraded to evacuate additional supply of power. Therefore, removal of the exclusivity provision will not increase quantum of power supply nor service delivery but may adversely affect the government's efforts towards privatization and also may lead to disarray in power supply in the economic hub of the country.
It is also a matter of serious concern that in recent months the Power Division lost two of its top officials. Irfan Ali, former Secretary Power Division, was removed in June this year because, as per sources, he raised the issue of tampering with the decision taken in Council of Common Interest on Net Hydel Profits and on matters relating to K-Electric. His successor, Omar Rasul, was made an OSD on 14 September after he submitted in writing that he could no longer continue to work 'under the present circumstances.' While in the past, secretaries resigned in protest against 'circumstances' due to their disagreements with elected officials' directives and/or their support for suggestions by those who did not hold any official position yet one would hope that the Cabinet takes cognizance of the recent concerns voiced by the two Secretaries of the Power Division, one of the poorest sector performers in the country, and investigate the matter thoroughly. It is not the job of a senior civil bureaucrat to blindly follow orders but to provide his/her input based on his/her vast experience.
In conclusion, to put it in military jargon, there is no unity of command within the sector which accounts for the sustained appalling performance indicators and justifies the focus of multilaterals on the implementation of structural and time-bound quantitative benchmarks. It is about time the federal cabinet addressed structural problems that the sector suffers from and stopped making scapegoats or seeking dismissals of those who may challenge executive decisions on merit.
Copyright Business Recorder, 2020