Afghan electric company struggles to make powerful customers pay

1 of 5. An Afghan vendor sits as he sells fruits in Kabul April 11, 2013. Afghanistan desperately needs to build an electricity network to generate jobs, develop its trillion-dollar mineral deposits - a process that will take decades - and win support for a government that has delivered few tangible benefits to its citizens. Picture taken April 11, 2013.

Credit: Reuters/Mohammad Ismail

By Katharine Houreld

KABUL | Mon Apr 15, 2013 5:13pm EDT

KABUL (Reuters) - How do you collect a $200,000 electricity bill from an Afghan warlord? Try cutting him off from the grid. Then turn off your cell phone so he can't yell at you.

General Rashid Dostum - one of Afghanistan's most powerful militia leaders - found someone else to reconnect him within hours, said Mirwais Alami, the chief commercial officer at Afghanistan's national power company.

"This will take years to collect," Alami said wryly. "But I am determined. If he doesn't pay, his son will pay."

Although Dostum is still holding out, others grudgingly paid up after the utility started cutting their power connections. The company cut off 1,000 defaulters last year and collected $230 million, a 40 percent increase in the last three years.

The approach is beginning to pay dividends. Three years ago, the company lost more than half its power to theft. Last year, that had fallen to a third. The utility is now breaking even in the capital. It's a small victory in an industry beset by woes.

Afghanistan desperately needs to build an electricity network to generate jobs, develop its trillion-dollar mineral deposits - a process that will take decades - and win support for a government that has delivered few tangible benefits to its citizens.

There has been progress, but it is slow. The national electricity utility, Da Afghanistan Breshna Sherkat (DABS), was set up in 2008. The next year, donors constructed power lines from neighboring Uzbekistan, which supplies most of Afghanistan's electricity, to the capital of Kabul.

The imports helped boost Afghanistan's power to 1,100 megawatts last year. It's about a quarter of what is needed, but a definite improvement on the 291 MW the country had a decade ago.

"(DABS) has shown striking progress for such a young organisation trying to run a national utility in a country that never had that before," said Roseann Casey, a top USAID official overseeing infrastructure in Afghanistan.

Around 80 percent of Afghan power is imported from neighboring countries, mainly Uzbekistan, so officials have to collect cash from customers if they don't want their country cut off. It's a struggle.

"We face a lot of problems. Some people think they should have free power, so when we try to collect they refuse to pay or get Parliament to call us in and give us problems," said Alami, brandishing letters he has sent to prominent Afghans and the attorney general's office.

FOREIGN HELP

Since DABS can't collect all its cash, foreign donors, led by the United States, Germany and India, are funding expansion. They hope to lay a power line down from Kabul to the southern city of Kandahar by 2016 - right through Taliban country.

Currently DABS in Kandahar is powered by U.S.-supplied diesel generators and U.S.-supplied diesel. The cost of the fuel alone is 400 percent of the revenue DABS collects in Kandahar, according to a report by the U.S. Special Inspector General for Afghanistan Reconstruction (SIGAR).

The city is one of Afghanistan's "power islands," urban centers electrified by generators, hydro plants or imports from Iran, Tajikistan, Turkmenistan or Uzbekistan. There's very little power in the countryside.

In total, donors are spending $1.6 billion in current projects for the power sector and have allocated $6.3 billion to improve electrical infrastructure until 2019, according to a recent World Bank report.

It doesn't always go smoothly. Last year the U.S. paid a contractor nearly $13 million for electrical meters to replace old, faulty meters in Kandahar. SIGAR auditors found the equipment stashed in a warehouse months later. DABS says the new meters are faulty.

The installation of a third turbine in Kajaki Dam in southern Helmand province, near Kandahar, should bump up capacity from 33 MW to 51.5 MW, but Kajaki has become another troubled project.

British troops fighting off insurgent attacks hauled the turbine to the dam five years ago but Chinese engineers dropped out after the area was attacked. A U.S. firm frequently criticized by U.S. government auditors was awarded the contract, but then Afghan President Hamid Karzai said he wanted DABS in charge.

Now another round of bidding is underway for the new contract. No one knows when the turbine will be installed.

Hydroelectric dams like Kajaki are the best way for Afghanistan to generate cheap power. It has no money to pay for imported fuel. But the dams are costly to build and infrastructure is vulnerable to attack.

Last month Afghan authorities discovered more than a ton of explosives at Salma Dam, a hydro project being built by Indian engineers in Herat province in the western region of the country and expected to produce 42 MW.

Days later, Taliban fighters in Pakistan killed seven people in an attack that destroyed the biggest power station in northern Khyber Paktunkwa province.

"(The Taliban) don't want people to be educated and to have light. They want them to be jobless, to be hopeless, to fight," said Alami.

Alami is hoping that rural Afghans will be happy enough to get electricity that they will protect new power lines in their area. For him, DABS's biggest challenge is not security, but collecting the cash to maintain the projects that donors build.

Last year DABS spent $12 million on maintenance, with USAID funding maintenance for some power plants.

Donors hope that improved revenue collection will help DABS pay for more costs.

"They will have the revenue they collect and then they can use that revenue for operations and maintenance," said Raouf Zia, a spokesman for the World Bank.

That might help save the power plants from the fate of many other donor-built projects that will have to be shut down as the NATO drawdown in 2014 approaches and aid dwindles.

Afghanistan would have to spend $1 billion a year just to operate and maintain all the infrastructure and buildings that foreign donors have constructed since 2001, the World Bank study found.

This year the country's total collected revenue will be just under $2.5 billion. Only $80 million was allocated for maintenance.

(Editing by Raju Gopalakrishnan)

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Afghan opium cultivation to rise in 2013 - U.N. report

Afghan farmers work at a poppy field in Jalalabad province May 5, 2012.

Credit: Reuters/Parwiz

By Fredrik Dahl

VIENNA | Mon Apr 15, 2013 6:24pm EDT

VIENNA (Reuters) - Afghan farmers attracted by high prices are likely to cultivate more opium this year, lining the pockets of traffickers and Taliban insurgents alike, a U.N. report said on Monday.

Afghanistan supplies about 90 percent of the world's opium, from which heroin is made, and its poppy-driven economy is helping to fuel the 12-year-long war.

Experts say uncertainty over the future after most foreign forces withdraw from Afghanistan by the end of 2014 could help cause a surge in opium growth as a means of generating cash.

The United Nations Office on Drugs and Crime (UNODC) said its latest report indicated a "strong association" between insecurity, lack of agricultural aid, and opium cultivation.

Villages with poor security and those which had not received agricultural help were much more likely to grow poppies in 2013 than those with good security and those which had received aid, it said.

Twelve provinces were forecast to show a rise in opium cultivation this year, according to the report by the Vienna-based UNODC and Afghanistan's Ministry of Counter Narcotics.

They included the southern provinces of Kandahar and Helmand - strongholds of the Taliban-led insurgency. This would follow a low yield last year caused by poppy disease and bad weather.

Helmand was expected to remain the biggest cultivating province.

"Opium prices, albeit lower than in 2010 and 2011, were still at a much higher level than between 2005 and 2009 making opium cultivation financially very attractive for farmers," the report said.

Three provinces - Balkh, Faryab and Takhar - may lose their poppy-free status unless effective eradication took place, the report said. Cultivation was forecast to decline in one province, Herat, and no major changes were foreseen in seven, including Kabul.

The report, Afghanistan Opium Risk Assessment 2013, called it a "worrying situation,"

"Poppy cultivation is not only expected to expand in areas where it already existed in 2012...but also in new areas or in areas where poppy cultivation was stopped," it said.

With foreign combat forces leaving in less than two years, and with much of their cash and air power expected to go with them, the Afghan government will need more help fighting poppy cultivation, experts say.

The UNODC in 2011 estimated the opium trade may have earned the Taliban $700 million, up from $200 million a year in the previous decade, with traffickers earning billions more.

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