A change in legal status has not improved the fortunes of Afghanistan’s electricity and water supply utilities. Yet, it is expected that the Fuel and Liquid Gas enterprise will soon follow as a limited liability company.
(2nd part) *A change in legal status has not improved the fortunes of Afghanistan’s electricity and water supply utilities. Yet, it is expected that the Fuel and Liquid Gas enterprise will soon follow as a limited liability company.
Two years ago the government transformed Da Afghanistan Breshna Moassassa and Water Supply into limited liability companies fully owned by the government. These two enterprises under the Ministry of Power and Ministry of City Development respectively were given over to multiple ministries.
Three reasons were cited for the switchover – as companies they would provide better services, attract more international investment and donor support, and gain self-sufficiency.
Jan Mohammad Mohmand, the head of the enterprises privatisation department in the Directorate of Enterprises, Ministry of Finance, firmly believes the decision was right. “According to Article 66 of the law on state-owned enterprises, those that have not been able to meet consumer needs and revenue needs should be dissolved and the legal status changed from enterprise to company.”
Both enterprises had blamed their poor performance on the subsidised service they provide consumers. Two years later are the new companies making money?
The Afghan Breshna Electricity Company: In 2009, Breshna was turned into a limited liability company jointly owned by the ministries of finance (45 percent shares), energy and water (35 percent), economy (10 percent) and city development (10 percent).
Mirwais Alami, the head, says revenue has increased by 60-70 percent in the past two years; electricity loss has decreased from 51 to 36 percent, and access to electricity has risen from 18 to 37 percent. The service delivery ability of the company grew to more than 100,000 KW of electricity in 2011, an unprecedented record.
Breshna has been promised assistance by the Asian Development Bank (ADB) of 570 million dollars via the Ministry of Finance, as well as millions of dollars from USAID, according to Mirwais Alami. He said 70 percent of electricity consumed in the country is brought from outside; only 30 percent is produced internally, from hydel and other sources.
Despite the progress Breshna has not been able to pull itself out of the red because of the government’s policy of subsidising domestic consumers. In fact the situation is much worse. In 2009, Minister of Power and Water, Ismail Khan, had justified the government intervention saying subsidies and high salaries for the staff were crippling the power sector. Now the salary of a Breshna director is 2,000 USD as compared to 6,000 Afs (119 USD) each earned in the state-owned enterprise. The current Breshna head is paid 8,000 USD.
Water Supply and Canalization Company: The five shareholders are the ministries of finance (40 percent), city development (35 percent), economy (10 percent), the National Environmental Protection Agency (10 percent) and Kabul municipality (5 percent).
Dad Mohammad Baheer, the head of the company says they have received a total of 200 million dollars from USAID, ADB, Economic Bank of Germany, Japan International Cooperation Agency (JICA) and Cida, Canada.
But revenues are falling. Baheer says the annual collection from consumers is 450 million dollars, while the expenses are nearly double. For every cubic metre of water distributed the company spends 22.5 Afs, while consumers pay 6-7 Afs.
Over the last two years the company has widened the water network in Kabul to provide piped water to 70 percent of planned areas and 28 percent of unplanned areas. Water is supplied to 24 of the 34 provinces and 30 Afghan cities.
An evaluation by Killid reveals that despite the increase in the number of consumers, the name change has not improved the fortunes of either utility.
Now Jan Mohammad Mohamand, head of the enterprises privatisation department, has told Killid the government was considering changing the legal status of the Fuel and Liquid Gas enterprise.
Engineer Fareed Sherzoy who heads the enterprise under the Ministry of Commerce and Industry, is against the move. He sees the hand of the land mafia in the switchover from enterprise to company.
“Changing the legal personality of the Fuel and Liquid Gas enterprise has been pushed by people who want to put on sale the tankers of the company as well as the other properties of the company at cheap prices,” Sherzoy says. He insists the enterprise makes an annual profit of 100 million USD and there was no reason at all to tamper with the legal status.
Wahidullah Ghazikhail, the spokesman of the Ministry of Commerce and Industry, is dismissive of Mohamand’s claim that the enterprise was in trouble and needed to be bailed out. Instead, he said, the enterprise had held the price line at 100 Afs per kg of oil last winter when it was severely tested by bitterly cold weather that had sent prices spiraling. The Ministry of Finance’s limited liability move has attracted more caustic comments than support.
(*) The 1st part of this report focused on how privatisation of state-enterprises has benefited a few.
