K-Electric has come under fire once again, after four extended blackouts in Karachi. It seems that this will not be the last time either. The privately owned power utility, has been blamed for the Karachi heat wave deaths, and is now being accused of negligence and mismanagement. Charges against the company include overbilling, gas theft, failure to upgrade the transmission system according to the increasing load, and neglecting areas of poor recovery.

K-Electric has rejected allegations of mismanagement. They have blamed the power outages on high humidity, sandstorms and weather conditions, as well as high electricity load and electricity theft. On the other hand, the Ministry for Water and Power continues to blame K-Electric for being deficient in system protection, which causes tripping at the slightest variation. The fact of the matter is that the company failed due to its own technical mismanagement. Their transmission and generation systems were not built to cater to the exponentially growing needs of the metropolis.

Private Equity firms such as Abraaj Capital, the largest shareholder in K-Electric, function on short to medium term investment horizons. They focus on quick turnarounds and aim to exit at an appropriate time at higher valuations. What Karachi needed was long term planning, not short-term profit making. Privatisation of K-Electric worked for a time, until there was a need to expand physical capital to cater to growing demand and greater loads.

This is why public goods are usually state owned, as the purpose is to provide a service rather than make a profit. Recent reports suggest that Abraaj is looking to sell its stake after bad press and protests. This will further decrease the value of the company, and it ability to provide electricity. The problem has to be addressed now, even if it is at a loss. Non-cooperation with Abraaj Capital, and its exit under duress may hamper prospects of much needed private investment into energy, while nationalisation of K-electric will transfer the loss on to the state and the taxpayer, and recreate another spiral of circular debt and government inefficiency. There are some hard decisions to be made at K-Electric, but the priority must be the people of Karachi.