Wednesday, 31 October 2012

Reflections from my stay in Pakistan IV: Karachi's success story

There is no shortage of problems in the world. Pakistan too has its fair share of difficulties. Readers enjoy reading about the trouble of others - perhaps it makes one's own situation seem more bearable. However, the world is not all bad. There are success stories available for all to see, if only one chooses to see them.

Thus is the story of the Karachi Electric Supply Corporation (KESC).
In Pakistan, this is a time when megawatts of electricity are almost as valuable as gold. If electricity were easily traded, mothers would pawn their jewelry in exchange for a few hours of comfort for infant children. 
Outside of Karachi, electricity shortages are a part of daily life. Eight, ten, twelve hours, or even more, without electricity is not uncommon. I experienced this myself up country, i.e. Multan, Lahore and Islamabad.
The story in Karachi is slightly different.
To the Federal and Sindh provincial government, KESC was a valuable instrument for making political side payments to supporters. Under state control, KESC was forced to take employees onto its payroll at the wishes of successive governments. The organization was bloated and riddled with corruption.
Corrupt meter readers tampered with meters to slow them down; corrupt inspectors overlooked the slow meters; engineers fixed the system to channel electricity to 'preferred' customers. The privileged and powerful thrived while ordinary citizen paid bills. That is until KESC ran out of cash to buy supplies to generate electricity.
Corporations which produce but don't get paid for production not only lose money but also run out of cash required to sustain daily operations. In other words, KESC soon found itself flirting with bankruptcy. The state was unable to continue with subsidies and KESC was privatized, a process made easier by the fact that KESC was already listed on the Karachi Stock Exchange.
A new KESC management structure for the privatized entity was put in place in 2008. Since that time, the new owners have faced down political pressure from the Federal and Sindh government and downsized the company to levels more proportionate with KESC's size and production capacity. (Reasonable 'golden handshake' packages were offered to voluntary and involuntary redundancies.) Moreover, significant new investment in the company's transmission and distribution system have been made to improve KESC's management information systems.
KESC management can (at last!) match electricity usage with revenues received, thus isolating 'bill defaulters' more easily. After several decades of state owned neglect, KESC runs like a normal commercial entity, i.e. pay for the electricity you use. Default and live with candlelight or generators.
During my month long stay in Karachi, I came to take uninterrupted electricity for granted - as most of us are wont to do in 2012. Moreover, voltage fluctuations of the past were very much reduced. The new KESC management won me over with the company's vastly improved performance.
 KESC is a success story in many ways. It demonstrates the efficiency of private enterprise over state control. The KESC turnaround is inspiring, especially to Karachites. It suggests the city's fortunes can be revived by determination and discipline. The city's massive size and scale is not an insurmountable obstacle.
In Karachi, as in life, there is almost always a solution, even to the most seemingly intractable problems.
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Imran is a business and management consultant. Through his work at Deodar Advisors and the Deodar Diagnostic, Imran improves profits of businesses operating in Singapore and the region. He can be reached at imran@deodaradvisors.com.

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