ISLAMABAD: The federal government has brushed aside a notion that K-Electric is a victim of gross non-payment and instead alleged that the Karachi-based power utility itself is guilty of consistent non-payment to others and at present owes more than Rs130 billion to federal entities.

The government stated this in a response submitted to the Supreme Court which is seized with a dispute over payment of outstanding dues of Rs28.7bn to K-Electric by the Karachi Water and Sewerage Board (KWSB).

On Monday, a three-judge bench headed by Justice Jawwad S. Khawaja asked the four provincial law officers to come up with their stance on the matter.

On Feb 19, the apex court issued a notice to Attorney General Salman Aslam Butt when K-Electric had said it was the responsibility of the federal government to clear the arrears of an institution which functioned under the Sindh government.

The controversy arose when K-Electric moved an appeal against Sindh High Court’s April 14, 2014 verdict restraining the power utility from interrupting electricity supply to KWSB.

It requested the Supreme Court to set aside the high court’s order and direct the federal government to pay K-Electric KWSB’s outstanding electricity dues of Rs28.7bn as of April 30, 2014, excluding mark-up.

K-Electric pleaded that the payment of dues for an electricity distribution company was like oxygen and if the company’s system broke down the entire Karachi would plunge into darkness.

K-Electric Limited (earlier known as Karachi Electric Supply Company Limited) is a privatised public utility principally engaged in the business of generation, transmission and distribution of electricity in Karachi and some adjoining areas in Sindh and Balochistan. The company distributes electricity to 2.4 million consumers of domestic, commercial and industrial sectors spreading over approximately 6,500 square kilometres of service territory.

In its response, the federal government claimed that of the Rs130bn, K-Electric owed Rs55.9bn to the National Transmission and Dispatch Company (NTDC), Rs55.5bn to the Sui Southern Gas Company, Rs3.228bn to the Pakistan State Oil, Rs4.1bn to the Karachi Nuclear Power Plant, Rs0.86bn to PTV and Rs10.6bn to different federal and provincial entities.

Moreover, the reply said, the federal government had suffered a financial impact of Rs269.5bn solely to facilitate K-Electric which was the beneficiary of considerably favourable terms in a 2008 agreement, compared to the original arrangement made in 2005. Immediately after the privatisation, it said, rules had been modified to the advantage of the company and to the detriment of the federal government.

The government said it was not at all obligated to make payment to K-Electric in respect of KWSB’s outstanding dues; instead the power utility was required to immediately clear all outstanding dues of the federal government.

K-Electric has sufficient capacity of 2,710MW, minus 650MW it is getting from the NTDC, to meet the average demand ranging between 2,000 and 2,500MW. But, the reply said, the power utility continued to rely on the electricity from the NTDC and about 365MW of its generation capacity was stated to be provided by independent power plants. The company has failed to take necessary steps to make its operations independent of the national grid and adopted practices which further enabled it to take unfair benefits from the system at the detriment of the federal government, national grid and citizens at large.

The government said K-Electric had also consistently committed violations of the Power Project Agreement (PPA) and intentionally underutilised its own facilities and adopted an operating scheme of perpetual reliance on the NTDC. And in complete violation of the PPA, K-Electric has at times even exceeded the maximum available supply of 650MW. This overdrawing results in increased cost of generation for the NTDC and also causes tripping/blasting and inevitably loadshedding.

In addition to significant financial concession made available to it, K-Electric was constant of its default of its payment obligation towards the NTDC, the reply said.

Under the 7th National Finance Commission award, it said, the provincial share in the divisible pool had been increased from 46.2 per cent in 2009-10 to 57.5pc in 2013-14. Under the new fiscal arrangements, the Sindh government received Rs304bn in 2013-14, compared to Rs143bn in 2009-10. The projected fiscal transfer from the divisible pool is Rs381bn for 2014-15.

The reply said that after the 18th Amendment it was the responsibility of the Sindh government to provide necessary budget allocation for the KWSB because it was a provincial department.

Published in Dawn, June 30th, 2015

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