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IMF informed of Karachi Electric Supply privatisation uncertainty

ISLAMABAD (November 13 2002) : The government has informed the visiting mission of International Monetary Fund (IMF) that privatisation of Karachi Electric Supply Corporation (KESC) was not certain due to lack of interest by one of the prospective buyers, Allied Energy System (AES), a US-based power company, sources told Business Recorder.

They said that government officials also apprised the IMF team that the German company has already been given deadline of December to submit Statement of Qualification (SoQ) as the company's officials have been barred to travel to Pakistan in the current situation.

According to these sources, government officials told the visiting team that an amount of one billion rupees was being arranged from the banks to improve the utility's transmission and distribution system.

Sources said that the KESC Managing Director, Brig Tariq Sadozai, briefed the team about the steps taken by the management to reduce losses and control power theft. He, however, pleaded that substantial funds were required to upgrade the system, which would definitely help the utility to improve its system.

IMF's team, they said, agreed with arguments by the officials regarding delay in privatisation of KESC, suggesting more strict measures for bill collection, reduction in losses and control of theft.

Sources said that IMF has also asked the government to deduct at source the arrears from the public sector departments or they should be given deadline for the payment of outstanding dues. Both the teams were of the view if such steps were taken, the utility's financial losses would be reduced from Rs 16 billion to Rs 12.4 billion.

Meanwhile a press release issued by the KESC in Karachi said the International Monetary Fund (IMF) has appreciated the performance of Karachi Electric Supply Corporation (KESC) management for improving revenue collection, reduction of T & D losses and improvement in customer services during the first quarter of the current fiscal year.

The mission headed by Klaus S Enders, Divisional Chief, Middle Eastern Department of the IMF, was briefed about the performance in a meeting at the Ministry of Finance. Senior officials of finance and water & power ministries were also present at the meeting. KESC MD, Brig Tariq Saddozai, made a detailed presentation on the working and performance of the KESC.

“I am happy with the accountability process initiated by KESC for reduction in transmission and distribution (T&D) losses, recovery of outstanding dues and improvement in customer services,” observed the IMF chief, Klaus S Enders who also expressed hope that the annual targets would be met easily.

The meeting agreed that the financial improvement plan submitted by the KESC should be met at all costs. The government of Pakistan should arrange the cash shortfall of the corporation as agreed in the financial improvement plan instead of borrowing from the commercial banks.

For the next quarter of the current financial year KESC has been asked to reduce T&D losses from 40 percent to 38 percent and effect 100 percent electricity dues recovery per month.

The meeting also discussed the privatisation and corporatisation process of Wapda, sources said, adding that the IMF team was not happy with the pace of progress in this direction. The government representatives, however, gave several justification for the delay in privatisation of Faisalabad Electric Supply Company (Fesco) and Jamshoro Power Company.

Sources said that Wapda's losses and power theft, non-application of Automatic Fuel Adjustment Formula, were also the main points of discussion due to which the utility was facing Rs 11 billion cash shortfall.

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