September 8, 2020: Karachi Chamber of Commerce & Industry has demanded NEPRA to end the monopoly of K Electric on power generation, distribution and sale of electricity to consumers in Karachi, who are suffering at the hands of KE for over 17 years, and city’s trade and industry has badly suffered.
In response to a notice published in the press by NEPRA inviting comments from stake-holders regarding the Authority Proposed Modification (APM) in existing distribution license of K-Electric Limited, KCCI has urged NEPRA to withdraw the exclusive rights of power generation, sales and distribution granted to K-Electric under License No.09/DL/2003 dated July 21, 2003, 17 years ago and allow more companies to conduct business of distribution and sale of electric power to consumers in Karachi, comprising Industries, Commercial establishments, Shopping Malls and homes.
A notification was published in the newspapers by NEPRA on 5th September’2020 in compliance with the order by Supreme Court of Pakistan which has taken Suo Moto notice of the malpractices and inefficiency of K-Electric and suffering of the citizens, industry and trade of Karachi at the hands of K-Electric.
KCCI being the representative body of trade and industry based in Karachi, is a major stake-holder in matters related to generation, distribution, supply and pricing of electricity. The chamber has therefore expressed the intention to become a party to the proceedings of Suo Moto case in the Supreme court of Pakistan.
In his official comments given in response to the notification of NEPRA, President KCCI Agha Shahab Ahmed Khan has stated that exclusivity granted to a single company (KEL) to undertake sale and distribution of Electric Power is tantamount to creation of monopoly on a vital source of energy. The exclusivity granted under License No.09/DL/2003 dated July 21, 2003, has put the people of Karachi and its trade and industry at the mercy of KEL. Since then the cost of electricity for industrial, commercial and residential consumers has sharply increased and the cost of production for industries has gone extremely high. Increased cost of electricity has also added to the chronic problem of circular debt.
Agha Shahab said that K-ELECTRIC has used various unfair means and tactics to make windfall profits by arbitrary increases in Tariff rates, change of electric meters, replacement of Copper cables with Aluminium cables and lack of investment in infrastructure which was obligatory under the terms of license granted to the company.
Consequences of KE’s monopoly on generation, sale and distribution of electricity have been disastrous in the last 17 years. A captive consumer market which includes Industries, Commercial establishments and homes, have been forced to purchase electricity from KE at arbitrary rates and suffered from over-billing due to faulty infrastructure and electric meters which can be manipulated, said the President KCCI.
From the notification published by NEPRA and the foot-dragging in taking any decisive action against K-Electric during the last many years, it is clear that NEPRA has a soft corner for KE and has reluctantly taken the action under the orders of Supreme Court, said Agha Shahab.
He added that NEPRA while taking action under Section 21 and Section 23E of NEPRA ACT’1997, should also invoke Section 3 (Sub.Sec.2 & 3) and Section 4 (sub-sec. 1, 2 and 3) of the COMPETITION ACT’2010. Section 4 of the Act stipulates that:
“No undertaking or association of undertakings shall enter into an agreement, or in case of an association of undertakings shall make a decision in respect of the production, supply, distribution, acquisition or control of goods or the provision of services which have the object or effect of preventing, restricting or reducing competition within the relevant market.”.
(Further the provisions under Sub.sec 2 and clauses thereof be also invoked).
Industrial, Commercial and residential consumers are at the mercy of KEL and have no other option but to purchase the electricity from KEL. In many other countries, more than one companies are allowed to produce, distribute and sell electricity to consumers which has led to a healthy competition and availability of a vital industrial input and essential utility at very competitive rates.
President KCCI further added that Impact of the monopoly of K Electric for nearly two decades has been extremely damaging to the economy. Electric power is in fact a vital input for industrial production, exports and trade in commodities and consumer products. High costs of electricity is one major factor which prevents our export from being globally competitive, while the cost of goods produced for domestic consumption has sharply increased. Ultimately all such costs are passed on to general public, of which 40% is living below poverty line.
The power utility is a strategic industry which has profound economic as well as security implications. It should not be left to the vested interest of a monopoly which only seeks to maximize profits rather than serve the economic interests of Pakistan. Therefore at least 3 to 4 companies should be issued license for distribution and sale of electric power instead of just one, in order to ensure a competitive pricing, quality of service and maintenance of infrastructure, said the President.
KCCI President has urged NEPRA to take Immediate action under the law to end the monopoly of K Electric Ltd., and diversify generation, distribution and sale of Electric power to other investors and companies willing to invest in infrastructure, distribution and sale of electricity which will encourage competition and benefit the consumers. Consumers must have the option to purchase electricity from any distributor/seller of electricity in the market instead of remaining captive and helpless.
Agha Shahab further emphasized that KCCI be made a party to the Suo Moto proceedings, being the largest stake holder in order to present our viewpoint to the honorable supreme court of Pakistan and release the people of Karachi from the shackles of K-Electric.
Press Release
36774
