GROUP NO-4

GROUP NAME:

AFNAIN RAFI , MADIHA SOOMRO & AMNA SAANI

COURSE CODE-MGT 4042

COURSE TITLE:TOTAL QUALITY MANAGEMENT

COURSE INSTRUCTOR: MISS UZMA

DATE OF SUBMISSION: 5/3/2018

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 Table of content

Acknowledgement………………………………………………………………….2

History ……………….…………………………………………………………………3-4
Who they are?

What they do

Competitor

Experienced management

Success of k electric………………………………………………………………5

Problems……………………………………………………………………………...6-10
Structured problems

Strategic planning for K Electric…………………………………………..11

Recommendation………………………………………………………………….12
Cheap ways to produce electricity

Summary………………………………………………………………………………14

Conclusion…………………………………………………………………………….15

Articles…………………………………………………………………………………16-19

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Acknowledgement

Perfection was the watchword we had in mind when we started working on this project. However people
generally agree that man can only strive to approach excellence but never actually achieve it. Exquisite
perfection is rather a trait of God, and by His grace, we have tried very hard to make this report an
excellent one. We would like to thank Miss UZMA RUSOOL for her time, assistance, guidance &
instructions; he gave to us in the friendliest manner throughout the course.

This project will surely help us in future.

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History

KESC is one of the oldest companies in Karachi and was established in the city even before the
creation of Pakistan in 1947.Incorporated on September 13, 1913, UNDER THE Indian
companies Act of 1882, the company was nationalized on November 29, 2005.KESC came
under new management in September, 2008: a significant number of professional managers have
joined under this management and will be running it until the company is turned into a best
practice utility.

The electricity supply business in Pakistan is under two companies. For Karachi city and
adjoining areas of Sindh and Baluchistan, it is under Karachi Electric Supply Corporation
(KESC).For rest of the Pakistan it falls under water and power development authority
(WAPDA). Both companies operate their own networks and they are also interconnected to each
other at two points. One is Ramshorn – Bin Qasim link in east of Karachi and other is HUBCO-
KESC link in west of Karachi. Both companies can provide power to each other through these
links.

In 2009, the Abraaj Group acquired a controlling stake in KES power limited.

WHO THEY ARE

Karachi Electric Supply Company (KESC) generates and supplies electric power to Karachi, a metropolis
with a population of over 17 million and one of the most populous cities in the world.

WHAT THEY DO

They currently provide electricity to over 2.1 million consumers, not only in Karachi but also in the towns
of Dhabejio and Gharo in the province of Sindh and Hub, Vindhar and bela in adjacent province of
Baluchistan.

COMPETETOR
KESC is an integrated electric supplying power under a monopoly license.

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Experienced management of K Electric

Highly experienced team with deep industry knowledge and a strong track record

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Turnaround success of K Electric

2016: Best Presented Annual Report Award 2014

By the South Asian Federation of Accountants (SAFA)

Certificate of Excellence

Corporate Social Responsibility Awards 2015

2014: FT / IFC Transformational Business Award for Project Finance - Energy

2014: CSR Corporate Social Responsibility

Certificate of Excellence

2012: Level ‘A’ Rating from Global Reporting Initiative

KE becomes the first organization in Pakistan to achieve such a rating
for an integrated report

2009-2013, 2015: Multiple Environmental and Fire Safety Awards

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 Structured problem
There are many structured or unstructured problem in electricity sector;

1) Burnt out of transformer due to fault of bushing or fault of any phase.

2) Burnt out of distribution box breaker, and burnt out of PVC cables.

3) Electricity stealing , around one million people are stealing the electricity through

 Kunde system
 Meter slowing
 Meter stopping

Now 70% kunda system problem is overcome by new policies of k electric.

4) Corruption

5) Political interference

6) Lack of production

7) Dependency on other electric corporations

8) Labor issues

9) Distribution problems

10) Management problems

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 Foreign countries strategies towards the problem electric
power industry

 China is having a proactive approach towards the problems like china uses information
technology in its electric power industry: in the beginning of 1960.

 As a result of these efforts Chinese electric power industry and government toot for
reform power sector and got many benefits like increasing of economical profit, the
improvement of power dispatching ability and managerial level.

 California had many issues which relate their power sector and most critical issue was
high utility price of electricity.

 The reason for high prices of electricity was raw material like natural gas, oil prices after
a long time government has made plans to solve these problems.

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PROBLEMS

The electricity supply business in Pakistan is under a sort of monopoly of two companies. For
Karachi city and adjoining areas of Sindh and Baluchistan, it is under Karachi Electric Supply
Corporation (KESC).For rest of the Pakistan it falls under water and Power Development Authority
(WAPDA).Both companies operate their own networks and they are also interconnected to each
other at two points. One is the Jamshoro Bin Qasim link in East of Karachi and other is HUBCO-
KESC link in West of Karachi. Both companies can provide power to each other through these
links. Karachi Electric Supply Corporation (KESC) will complete 94 years of its existence this
year but KESC still the worst organization of Pakistan and still faces many of the serious
problems. Such problems are given below:

1. POWERGENERATION PROBLEMS:

As of 2007, KESC owns 1756 mw of generation capacity which had overtime been degraded to
1336 mw. The approximate demand for power in the city is at least 2300 mw. To meet the
supply-demand gap, KESC purchases power from WAPDA, independent power producers and
currently buys 250 MW power from the Independent Power Producers located in Karachi,
namely TAPAL ENERGY, GUL AHMED ENERGY and ANOUD POWERGENERATION
LTD. KESC also buys 40-50 MW power from Karachi Nuclear Power Plant and Pakistan Steel
Mills, which provides 20 MW electricity. In addition to this Government of Pakistan has recently
instructed WAPDA to sell up to 800 MW to KESC? There has been no recent increase in the
generation capacity in KESC region of supply. The last power plant to go online in Karachi area
was HUBCO which falls under WAPDA and it is already more than 10 years old. There is a
power and desalination plant being worked on in Defense Phase VIII which will be the first one
to go on KESC network by the end of 2007. KESC does have plans to enhance is capacity in two
phases. First is going to be a 220MW extension at Korangi Thermal Power Station and then in
phase II. There will be an additional 5MW capacity installed at Bin Qasim Thermal Power
Station.

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2-GEOGRAPHIC LOCATION OF KESC POWER PLANTS:

Most of the generation capacity of KESC is located in east of the city. This adds an unnecessary
transmission cost in moving this power to north, west and south of the city.

3-DISTRIBUTION PROBLEMS:
The distribution network is not only below demand but there is a huge factor of power theft also.
KESC clients who already have connections bypass the electricity meters. Few years ago. KESC
was being run by the Army and even they couldn’t stop the power theft in spite of moving
electricity meters of most of the city out on the streets. This was done to ensure the meters are
not tempered with.-Industrial clients who are billed according to a sanctioned load use bigger
grips to get more power-People use kundas (hooks) on distribution lines.

4-MANAGEMENT ISSUES: 

One more angle of KESC’s inefficiency is its management. The company was sold to a private
firm Messer KESC Power and Others who took control of the company on November 29,
2005. The new management employed Siemens Pakistan Engineering Limited as
the Operations and Management (O&M) Contractor. This includes generation, transmission,
distribution, maintenance etc. KESC of old days was highly unionized and the labor is naturally
wary of working with the new employers.

4- DECFECTIVE POLICIES:

The electricity load shedding in Pakistan would have not been a big problem to cope with but
it’s made much bigger by adopting the defective policies such as

CIRCULAR DEBT:
One of the causes of load shedding is called the circular debt, which means the private electricity
generation companies keep generating the power but they do not get the money for the electricity
they have provided, in that case they can generate the electricity for limited period and after that
when the outstanding amount to be paid by government to these companies cross a limit, by
being not able to fuel costs these companies stop the production till they have get paid back by
government.

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5-CORRUPTION:
More than electricity, KESC has supplied corruption in our country. The evils of KESC have
also initiated to a legal way of corruption and that is through short due dates to pay the bills.
KESC increases the rate of electricity day by day.

6)-LOW PROFITABILITY:
The reasons behind the low profitability are
 INCREASING COST OF FUEL AND GAS:
As day by day cost of farness oil and gas is increasing which ultimately increases cost for
generating electricity and effects profitability level.
 PURCHASING ELECTRICITY FROM EXTERNAL SOURCES:
KESC is generating nearly 61% of electricity through its own systems and other 39%
electricity is being purchased from others who charge high prices which ultimately
effects profitability.

7)-LOW PRODUCTIVITY:

In power sector of Pakistan is facing is a huge gap between demand and supply over many years
The productivity of electricity is low and there is a steel need of borrowing electricity from
others.
KE has not increased its in-house generation capacity. Only 25% is efficient with economic and
environmental consequences.

8)-LABOR ISSUES:
Major problem of KE is due to the labor management dispute according to them KE is not
providing the safety against the Life Risk, Security from violence, Safe tools unbiased
Environment and good working conditions. Management is downsizing labors for reducing the
cost which creating a clash between labor and management.

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STRATEGIC PLANNING FOR K ELECTRIC:

1.The government should invests in increasing Generation capability of the industrial hub of the
country by installing combined cycle generating units at the sites of korangi. Thermal Power
Plant, Bin Qasim Plant and West Wharf Power Plant. All three sites already have developed
infra-structure and switch yards connected to transmission networks and conversion to combined
cycle will also improve efficiencies of these plants. We should make a small gas pipeline from
Iran, and start the production of electricity at any place on the Pakistan-Iran border.

2. Pakistan is currently bearing losses of its total power generated. These losses include losses
incurred during transmission and distribution. If government takes a step and reduces then
we can save electricity which can be useful and ultimately the rates of electricity will be reduced.

3. Building new power generation plants on fast track basis in order to meet the present shortfall
in power supply.

4.Private industries which are generating power for their own industrial electricity coverage if
these generating capacity are merged too this might become extra power and this power can
reduce the KE’s problem to some extend at mutually agreed price. This would help in reducing
load shedding.

5. Install gas-based power plants on fast track and grate power to cater the demand of the city.

6. Labor and management should make a committee to resolve the issues to deal with this core
issue.

7. As far as profitability is concerned KE should look into the matter for generating profits.KE
must review its costing procedure and should find the way out to reduce the cost.

8. The pricing of electricity is another major issue which requires careful consecration. In order
to become demand and socially competitive, our economy needs cheap and stable utility prices.
The electricity consumers in Pakistan are already paying high prices of electricity. If the prices
are not reduced the consumers might take illegal actions.

Beside this current position of KE can be improve if above measures are adopted efficiently and
effectively
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 RECOMENDATION

 Management should support the employees morally and financially for higher
educations. Employees can improve their professional and personal skills which
will be beneficial for the organization.
 Open Door Environment should be introduced. Each and every employee should
have right to speak against or in favor to any policy.
 Status of employees should be equal. Equal employment opportunities should be
given no discrimination among employees.
 A separate monitoring team should be formed for speak up campaign and proper
feedback system should also be introduced for customer satisfaction.
 Introduce new policies for billing system and the customers and employee may be
aware of billing system.
 The equipment’s of testing and for other purpose should be replace time to time
so they can meet the requirements of modern era.
 Employees must be satisfied by providing the medical residential or convince
facility.
 All overhead system should be converted into underground cabling system. This
will help in reducing theft and will also help in minimizing faults.
 Proper check and balance system should be introduced for electricity stealing and
FIR is lodged against them.
 Load shedding schedule should be published in print media.
 A fair securement system may be introduced for better performance of the
organization.
 Meter should be installed free of cost, so it will reduce kunya system and
electricity thefts.
 Prepaid meter should be installed instead of postpaid this may help in reducing
theft.
 E-billing system should be launched so consumers can pay online.

Long term planning is required for electricity self-generation resources like Wind, Coal,
Garbage etc., and the purchase of expensive electricity from other companies must be
avoided.
An effective legal department should be formed to deal with the electricity theft cases.
Effective coordination is required with local political representatives to avoid the illegal
pressure from various political groups.

Cheap and innovative ways to produce electricity

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 Many countries like China, USA and America are using innovative ways of producing
energy and in developed countries there is no issue of electricity because they are
utilizing their resources to generate the energy\so Pakistan should learn from other
countries instead of borrowing.

1) Generate electricity from waste

One way to generate electricity is to burn solid waste, garbage is used to produce
energy at waste to energy.

 Biomass, or biogenic materials such as paper , food waste , grass

clippings , leaves , wood , leather products
These should be recycled to produce electricity.

2) Utilize Body Heat

The heat produced from our body can be converted into power. The 2.5 million sq-
ft shopping mall, Mall of America, already utilizes the heat generated by the
people.

3) coal
Coal provides a reliable source of energy...But it is a dirty fuel and produce heavy
green house emmisions

4) Wind tribunes
Wind turbines (modern windmills) turn wind energy into electicity.it is a good
method of supplying energy to remote areas. Wind power is renewanle. Winds will
keep on blowing; it makes sense to use them.

5) Waves
The water in the sea rises and falls because of waves on the surface. Wave
machines use kinetic energy in this movement to drive electricity generators.

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 SUMMARY

This report responds to the project assigned by Miss UZMA RUSOOL that she requires
a report by us which not only covers the case of problems and issues in K ELECTRIC but
also recommends the solution for the up gradation of K ELECTRIC. The main and core
issues with K ELECTRIC are related to the Production , Electricity Hefting , Low
Profitability and labor management disputes. The rising demands of the electricity in the
city causing the inefficiencies in the corporation and K ELECRIC is trying to its level
best to cop up itself from such problems but the target is still unachievable. Through the
deep analysis of all the aspects of Electric weakness we would recommend that; Electric
should involve their labor in decision making because these labors are backbone of the
corporation further more organization must review their compensation plans to satisfy
their employees. Electric should increase the generating capacity of the production
houses and electricity generating plants by upgradation and installing new plants. Electric
should make inspection team which is supposed to investigate the areas that where the
electricity is stealing. Profitability can be raised if the internal corruption gets decreased
and absolute use of funds is done.

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 CONCLUSION

“Why Karachi Electric Supply Corporation is unable to meet the current electricity
demand of the city Karachi”

Electric is electric supply corporation providing electricity to inhabitants of Karachi. K

Electric is currently several challenges. It is facing low production of electricity due to
which load shedding occurs, problem of low trained workers. All the problems mentioned
are behind Electric’s lack of coverage. As the single power utility for Karachi,KE is
expected to provide 4-hour per day power supply while maintaining high standards of
quality, efficiency reliability but not!Karachities hope that with the privatization of the
utility Corporation, quality of services would improve .This might happen if privatization
process is properly structured.

ARTICLES
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Article no-1

REFERENCE the article about the KESC (Jan 9). There is no ‘campaign’ under way
to ‘lionize’ the KESC chairman. The KESC’s turnaround and its overall performance
have invited the interest of local and foreign media which the KESC welcomes.

The KESC has not ‘claimed’ its ‘accomplishments’ as these are observations and
reviews by third parties. By way of illustration, AC Nielsen is a global marketing
research firm and its Brand Equity Index for the KESC speaks for itself regarding the
improvement over the last few years. We do not believe in spin-doctoring and let the
results and performance speaks for them.

Regarding Abraaj Capital’s exit strategy; ‘exit’ is a matter for shareholders who have
every right to recover their capital along with a reasonable return on their investment.
How and when this exit takes place is not a public debate; it goes without saying,
however, that  all applicable rules, consents and laws of the land will be followed by
the shareholders in the process, and the operations handed over to an entity capable
and willing to take the KESC to the next level of performance.

The proposed 560 MW Bin Qasim-2 power project was essentially ‘dead’ when
Abraaj took over the KESC in 2008/2009. The Abraaj management did everything,
including contract negotiations, arranging financing, ground-breaking,
implementation and commissioning of this landmark project, on time, as per
specification and within the budget.

The KESC has always clarified that the $1bn investment is a combination of fresh
equity (50pc), and debt (50pc) arranged on a non-recourse basis against the
company’s incremental assets and cash-flows. So there is nothing unusual about the
fact.
Regarding the KESC’s tariff increase, it is clarified that Nepra allowed the increase to
compensate for the increase in input cost, such as the price of furnace oil and gas over
which the company has no control. Under the fixed MYT tariff regime, the KESC

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makes a return only through reduction in its transmission and distribution (T&D)
losses, improvement in plant efficiency, and by attracting more good-paying
customers. There is no concept of ‘ghost’ billing. Our performance and accounts are
scrutinized and audited by renowned firms.

Syed Ovais Akhtar

Associate Account Manager, KESC

Karachi

Article no-2
The rebranding campaign includes a new logo and tagline and a change in name from KESC to K-Electric.

 Electric Supply Corporation (KESC) has always been a part of lounge and office
conversations across the country. The endless cycle of unannounced load shedding, power
breakdowns, ever-increasing bills, and with no one to register, respond or resolve the
complaints, KESC has rarely been in the news for the right reasons. Towards the end of
2013 however, KESC again made waves, but this time for a rebranding campaign with a
new logo and tagline and a change in name from KESC to K-Electric.

The reason for this transformation was to ensure that the new image reflected the changes that
the company has made since its privatization under the Abraaj Group in 2009 as well as to mark
its centenary.

Prior to 2009, despite being the largest vertically integrated power utility operating in Pakistan,
KESC had registered losses for 17 consecutive years (1994 to 2011), owing to pervasive
corruption, mismanagement of resources and the lack of a uniform, ethical operational
framework governing the organization. The Abraaj management formulated a two-fold value
creation plan (VCP), which included a change in operations to improve efficiencies, followed by
the creation of a new brand identity.

The transformation entailed the setting up of a marketing and communications department in

2009 for image-building and customer awareness with campaigns such as the ‘Azm’ campaign
launched in 2009 (and subsequent ads warning against power theft, etc.). Changes were also
introduced in HR composition and customer facilitation policies along with significant
technological upgrades.

As a utility voided, maintaining consistent service quality is at the heart of the company’s
operations.

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According to Fahad Ali Khan, GM, Marketing Communications, K-Electric, the company
conducted the “single largest employee engagement programmer in the history of Pakistan’s
corporate sector between 2009 and 2013.”

On the technological front, the focus, according to Khan was “to provide reliable and affordable
energy.”

As part of the Customer Facilitation Framework, KESC set up a Twitter account to act as a
discussion forum as well as a notification service by providing real time updates of power
outages and complaint registration. Recently, a SMS service and a helpline have also been set up
to ensure that customers have easy access to accurate information. However, the most important
facet of the customer engagement policy was the creation of Integrated Business Centers (IBCs),
which act as one-window solutions for all customer complaints, feedback and queries.

As a result of this internal overhaul, KESC witnessed a turnaround. After 17 consecutive years of
losses, the company registered a profit in the last two fiscal years. Along with this transformation
into a profit making entity, KESC exempted 56% of the city from load shedding, the duration of
load shedding has been minimized overall (according to the company, in areas where there is
100% bill payment there has been no load shedding at all), electricity thefts have been curtailed
to some extent and a zero hour load shedding policy has been initiated for the industrial sector.

This transition set the platform for KESC to execute a full-scale rebranding campaign.

According to Khan, “Milestones had to be achieved first, which we have accomplished today.”

Rebranding alone was not sufficient, and the brand team believed that a new name was
warranted as well.

Khan says, “Since 2009, KESC has practically demonstrated the ability to bring about a
sustainable change, visibly pursuing the path of growth and transformation with clear signs of
service, operational and financial turnaround,” and therefore a new name was necessary.

He adds that K-Energy would have been the ideal brand name, but since that name was already
taken (K-Energy is a subsidiary of K-Electric), they had to settle for the second best.

In terms of the rebranding, Khan explained that the new tagline “Energy that moves life” was
coined to indicate that K-Electric is more than a power utility; it is a singular and reliable source
of energy that will fuel economic growth, while at the same time truly reaffirm Karachi’s lost
identity as the ‘City of lights’.

Patriotism was an important factor that K-Electric wanted to incorporate in the campaign.

Noman Shakil, Creative Manager, Interflow Communications (K-Electric’s creative agency),

who conceived and conceptualized the logo and colors explained:

“The logo depicts the feathers of a partridge which is Pakistan’s national bird. Also, each color
stands for one element of the ESG Framework; orange for energy (stress and hassle-free lives for
the people of Karachi), blue for social (CSR initiatives for NGOs and welfare organizations) and

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green for the environment (all new generation plants utilize environmentally friendly
technologies).”

The new tagline “Energy that moves life” was coined to indicate that K-Electric is more
than a power utility; it is a singular and reliable source of energy that will fuel economic
growth, while at the same time truly reaffirm Karachi’s lost identity as the ‘City of lights’.

The campaign included a TVC that narrates the story of how KESC started in 1913, and then
shows a decade wise flow of the changes made that justified a new identity. The media plan by
Brainchild Communications included airing the on all major news and infotainment channels and
the promotional mix included streamers and standees across the city, print advertisements in
national and regional newspapers, promotion through social media and using branded content
(name, logo and tagline) on electricity bills.

The campaign seems to have achieved the objective of creating awareness among customers that
“the old KESC is now K-Electric.” However, there has been a mixed reaction on social media
particularly, with some people appreciating the creativity, and others criticizing K-Electric for
using scarce resources on marketing instead of improving the service.

Acknowledging that this is fairly common feedback, Khan responds that the “marketing fund is a
small fraction versus the monetary value of major issues at hand.”

While service quality (electricity provision, customer response and customer engagement) has
improved, there are many battles that still have to be fought

.“The problem,” Khan says, “is that certain factors are beyond our control. The government, and
especially KWSB has yet to pay its dues and inadequate gas supply severely affects power
generation and the electricity tariff. Then there is the issue of electricity theft: we conducted a
massive ‘kunda-removal’ campaign and took down 250,000 illegal connections in one day, the
next day almost all of them had been put up again!”

It will be some time before all customer issues and complaints are resolved and Pakistan
becomes a load shedding-free country. A step in the right direction has been taken by K-Electric,
in engaging and facilitating customers by providing accurate information about power
shutdowns, notifying them about when power will be restored and improving service quality.
However, a lack of resources and government support continue to remain crucial challenges that
have yet to be tackled and can derail the achievement of the milestones that K-Electric has set for
itself in the planned time frame.

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