Pakistan utility company fights to power chaotic port megacity

KARACHI Sun Jun 30, 2013 7:39pm EDT

1 of 3. A view is seen of a busy street in Karachi June 29, 2013. Since Pakistan's biggest electricity company was privatised, its headquarters have been looted, its employees kidnapped and the government tried to arrest its boss. It's been a roaring success. Power cuts lasting 12 hours a day or more have devastated Pakistan's economy. The only city bucking the trend is the violent megacity of Karachi, Pakistan's financial heart - thanks to Tabish Gauhar and his team at the Karachi Electricity Supply Company (KESC).

Credit: Reuters/Akhtar Soomro

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KARACHI (Reuters) - Since Pakistan's biggest electricity company was privatized, its headquarters have been looted, its employees kidnapped and the government tried to arrest its boss.

It's been a roaring success.

Power cuts lasting 12 hours a day or more have devastated Pakistan's economy. The loss of millions of jobs has fuelled unrest in a nuclear-armed nation already beset by a Taliban insurgency.

The only city bucking the trend is the violent megacity of Karachi, Pakistan's financial heart - thanks to Tabish Gauhar and his team at the Karachi Electricity Supply Company (KESC).

"It has consumed every ounce of my energy," 42-year-old Gauhar told Reuters in his wood-paneled office. "But we have helped millions of people."

The new government of Prime Minister Nawaz Sharif won an election in May partly because it promised to fix the power cuts. Now many are wondering if KESC's successful privatization will be repeated elsewhere.

The government is due to release its energy strategy this week. One official said it was going to look closely at privatizing more state-run power companies.

POWER STRUGGLE

Pakistan's power companies share similar woes. Staff are often corrupt and influential families won't pay bills. The government sells power below the cost of production but pays subsidies late or not at all. Plants cannot afford fuel.

At the state-run Peshawar Electricity Supply Company, the majority of staff are illiterate, most new hires are relatives of existing staff and 37 percent of power generated was stolen, a 2011 USAID-funded audit found.

KESC had all the same problems when Dubai-based private equity firm Abraaj Capital bought a controlling stake in 2008. Gauhar and his Abraaj team decided to slash the workforce by a third, cut off non-payers and destroy illegal connections.

It started a war.

Redundant employees offered to work for free because they made such fat kickbacks. When management refused, thousands of protesters ransacked KESC's headquarters. They camped outside for months.

Gunmen attacked Gauhar's house. Workers crossed picket lines every day on the floor of police cars and more than 200 KESC employees were injured.

"We felt very lonely then," said Gauhar, who moved from CEO to chairman of KESC earlier this year. "When I used to visit one of our injured employees in the hospital it was hard for me to look them in the eye."

Many in the populist pro-labor government vilified KESC. Later, legislators tried to arrest Gauhar for not attending sub-committee meetings in the capital.

COLLECTING CASH

After the protests dissipated, KESC's next problem was making customers pay. More than a third of KESC's electricity was stolen in 2009. Those who got bills often ignored them.

One wealthy patriarch said he couldn't possibly start paying because his colleagues would think he had no influence left.

KESC started cutting off non-payers. When a transformer burned out in an area with high theft, KESC asked for two months' payment from the area's residents before replacing it.

KESC divided up the city of 18 million. Areas where 80 percent of people pay bills now have no regular power cuts. Areas with high loss -- often crime-ridden, sweltering slums -- have long power cuts. KESC is widely hated there.

Driver Muhammed Fayyaz says his neighborhood often has up to 10 hours of cuts per day. Summer temperatures top 40 degrees Celsius and protests are frequent.

"People block the main road and throw stones at passing vehicles," he said.

Fayyaz lives in a high-theft area. Stealing power is easy. Makeshift wires with metal hooks festoon KESC's lines in the sun-baked streets. Some lead to roadside businesses. Others head into the distance atop lines of makeshift bamboo poles.

"We clean them up but in five minutes they are back again," said KESC manager Muhammad Siddiq.

Mafias control the illegal lines. KESC staff who remove them are often attacked. Ten were taken hostage in a single incident last month. A mob attacked Siddiq's office hours after he spoke to Reuters.

Some slums are held by the Taliban or gangs, and KESC staff can't even enter. They are experimenting with licensing powerful local businessmen to collect bills and cut off non-payers.

BRIGHTER FUTURE?

But the painful reforms have begun paying dividends. Last year the company made its first profit in 17 years. Theft has fallen by 9 percent in four years. Half the city, including two industrial zones, does not have daily power cuts.

"It has made a big difference to my business," said tycoon S.M. Muneer, whose leather and textile factories employ thousands. "I cannot run a textile factory on a battery from my car."

Not everyone is happy. Gas shortages and maintenance problems still cause long power cuts. Customers who do pay bills suffer if their neighbors don't. Many poor can't afford the bills.

To improve customer relations, KESC gives free power to hundreds of charity schools and uninterrupted or subsidized power to 18 big public hospitals. KESC also built new call centers, connections and power plants.

The gleaming Chinese-built gas plant at the city's Bin Qasim port can generate 560 MW. But Pakistan rarely has enough gas for the plant to work at full capacity.

KESC blames that on national gas shortages, but the Sui Southern Gas Company, which is 70 percent government-owned, says that KESC owes it $500 million. KESC disputes the figure is that high and says it is offsetting the payment against outstanding bills from government entities that total $720 million.

"We've still got problems," said Syed Nayyer Hussain, KESC's new CEO. "But at least we've started."

(Additional reporting by Syed Raza Hassan in Islamabad; Editing by Alex Richardson)

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Comments (3)
notadiplomat wrote:
I don’t know what Pakistan this writer visited but the one we all live in is not even remotely close to what she describes. Business are shutting down everyday because there is no electricity in Karachi. People are literraly dying of heat because there is no electricity to power the AC or even the fans. If you get electricity 6 out of 24 hours are day, you are an exception and the luckiest of the lucky. We reside in a relatively influential and high end part of the city (DHA) but yet we go thru the same torture everyday like the lesser affluent neighborhoods. This writer must have visited a different country and a different city than the Karachi in Pakistan we know. I am amazed at reuters to post something without verifying its content. All one has to do is open a local newspaper (even web based) to see the reality.

Jun 30, 2013 9:09pm EDT  --  Report as abuse
Awaaz-e-Haq wrote:
The author has presented one side view only favoring KESC’s stance. KESC has created this perception that they are doing power cuts (Load Shedding) based on high loss and low loss criteria, however, there entire load shedding policy is biased and non-transparent. They have never published any stats publicly about these so called high loss and loss areas, they have never published the duration of load shedding of each area of Karachi, they have never published the list of defaulters. In absence of any publicly presented facts, KESC’s entire load shedding policy is questionable. Anyone who is familiar to Karachi, can easy figure out that “incidentally” all or most load shedding exempted areas happen to be elite/posh areas of Karachi where KESC is doing scheduled and unscheduled load shedding.

Writer has given wrong picture about such areas being slumps, and crime impacted – most of such areas have no such issues. Writer has also not presented any facts about corruption within KESC which is the biggest cause of theft as KESC’s own employees facilitate theft in most cases.

KESC must bring transparency to their policies by publicly publishing facts about losses Vs Load shedding hours of each area of Karachi on monthly basis. In absence of sharing such facts with consumers, they have absolutely no right to put one sided allegations of high theft and penalize entire area with undue scheduled and unscheduled load shedding.

Reality is that KESC’s management is promoting a “Social Divide” whereby selective elite areas of Karachi are offered 24×7 electricity as well as better services, while others face excessive undue power cuts. It is KESC’s responsibility to control theft, and each bill paying consumer who falls under same tariff structure deserves same treatment which KESC not doing, and hence they are culprit of consumer rights violation.

The writer approached consumers of KESC on twitter for writing this article, and although many consumers provided such facts, however, writer has completely ignored those and instead opted to write an article which is full support of KESC.

We expect that such articles should be written from a balanced perspective presented the views of both which writer has not done.

Jul 01, 2013 1:46am EDT  --  Report as abuse
NasirDanial wrote:
But I believe most of the views of this author are right. I also lived and my family still living in a locality in Karachi where power cuts are around 6-8 hours daily. But many of my family members who are living nearby (say in Block D, North Nazimabad) they don’t experience any regular power cuts. A year back I was talking to one of my cousins, he told me his electric generator was no more in working order and I asked why? He replied because we did not use it for around 2 years. It is because he lives in an area which comes in the list where KESC recovers at least 80% of the bills.

Jul 01, 2013 3:22pm EDT  --  Report as abuse
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