Collective efforts needed to improve the mega city, the only source of revenue collection for economic development

Mar 22 - 28, 1999

Despite being the hub of economic activities in Pakistan, Karachi has always been the victim of negligence. The poor state of infrastructure, ineffective administration and of course persistent law and order situation, altogether, have deprived the city of the needed pace of economic growth it demands.

The onset of disturbed law and order situation for the last several years triggered mainly by rising unemployment in Karachi. The sense of deprivation among the educated youth has further aggravated the state. The persistent disturbed conditions, rampant corruption, complexity of multiple taxes and depleted infrastructure have affected the flow of investment both local and foreign in the city. As a result the area, earmarked for foreign investment at the Bin Qasim industrial estate, has not been able to attract investors so far. It is the known fact that Karachi generates over 60 per cent of the total revenue of the country but unfortunately very little attention is paid to resolve the problems faced by this metropolitan city.

According to an estimate, Karachi is the home of 14 million people. The stagnant economic development for the last many years has put enormous pressures on Karachi's ability to meet the socio-economic needs of the residents. The younger generation, due to frustration, is prone to violence because of ever increasing sense of deprivation.

The disturbed and volatile conditions prevailing in the city for more than a decade have almost destroyed the academic life of the educational institutions. The city colleges generally present a deserted look as the students in general avoid to attend their classes. In order to take advantage of the situation, a large number of coaching centres, running purely on commercial basis, have emerged all over the city. The majority of the students attend these coaching centres just to get through the examinations. This unfortunate situation has down-graded the standard of the education to a pathetic level in this city which sometimes back used to be called as the "seat of learning".


Karachi's contribution to the manufacturing sector, which was close to 60 per cent in recent past, has now come down to merely 30 per cent. Apart from the industrial areas like SITE, Korangi, Landhi, Federal B Area, Gharo, another two industrial estates, one in Nooriabad and the other in Hub, are close to proximity of Karachi. The Nooriabad and Hub industrial areas, however, could not go into full cry and almost grounded before they could take off due to rampant corruption, law and order situation and other social factors.


Karachi Export Processing Zone (KEPZ) comprises an area of 300 acres, out of which 200 acres have been fully developed in the first phase at an estimated cost of Rs365 million. All infrastructure facilities have been provided to the investors under "one window " facility.

By July 31, 1998, 161 industrial ventures stood approved for setting up various types of industries in the zone, out of which 115 are in production and 46 units are at various stages of implementation. Again inspite of the best possible incentives are available, the pace of development in KEPZ is not upto the mark and a vast land is still awaiting investors.


The Karachi Electric Supply Corporation (KESC), which is responsible for energy supplies to over 1.3 million industrial and domestic consumers, is suffering from administrative and financial mess-up.

Frequent power breakdowns and loadsheddings due to shortage in energy supplies and depleted transmission and distribution network, altogether, have shattered the confidence of the investors.

Despite induction of private power producing units and inter-connection with WAPDA's national grid, the highly defective and inefficient transmission and distribution system of KESC causes huge production losses to the industry. On top of this about 20 per cent of the localities remain without electricity in Karachi.

The Karachi Chamber of Commerce and Industry (KCCI) while deploring the dismal performance of KESC has said that industry is suffering Rs 8.8 million losses per hour due to the power crisis, including frequent break-downs and load-shedding.

The KCCI lamented that on the one side, there has been persistent increase in electric tariff while on the other, no improvement has been witnessed so far. There are indications that the government is intended to increase power rates once again by 11 per cent. How the government is going to achieve the target of doubling the exports by year 2000, is the question beyond comprehension specially under prevailing circumstances.

Exorbitant power tariff is another critical point which also has its serious implications. The manufacturing sector generally avoid to go into value addition as the high rates of power render the prices of goods incompetitive in the export market. One of the glaring example of this situation is the textile sector. Instead of going into the process of value addition by utilizing the yarn into weaving the textile sector simply exports more than 50 per cent of the cotton yarn produced in the country. The incidence of power losses mainly on account of pilferage has risen to the level of 40 per cent for KESC. The exorbitantly high rate of power and inflated billings are stated to be the basic reasons for the high rate of power theft in its franchised area. Authorities at the helm of affairs should also keep in mind the low per capita income, i.e. about $450 in Pakistan, while deciding the power rates. Endorsing this point of view, the KCCI said that power constitutes a major component of the cost of production of the industrial sector. Exorbitant rise in power tariff would miserably change the cost price parity of the products rendering them incompetitive in the world market. The KCCI has also urged the NEPRA, the regulating body of the power sector, to refrain from substantial increase in power tariff.

Although the present management of the KESC has been trying to arrest its T&D losses for quite some times, yet it suffered a loss of over Rs2,960 million during the first half of the current financial year. The amount of losses was estimated at Rs3,162 million during the corresponding period of previous year.

The major factor which affected the KESC's financial position are said to be the depleted transmission and distribution network and higher cost of power, purchased from IPPs. KESC pays about Rs. 500 million per month to the two IPPs located in its franchised area.


The incidents of vehicle snatchings, particularly cars and motorbikes, registered an increase in the first half of March 1999. This indicates the persisting law and order situation in Karachi.

During the said period, as many as 304 vehicles, including 146 cars were taken away at gun point from different parts of the city. During the corresponding period in February 1999, some 293 vehicles including 141 cars were stolen or snatched at gun point in the city. The incidents of car snatching, however, do not give a complete picture of the crime situation in the city. According to the prevailing trend, over 90 per cent incidents of hold-ups, burglaries and other crimes are not reported to the police. The majority of the victims avoid to come into contact with the police to avoid further victimization. As far as the incidents of car or bike snatching are concerned, people have no option but to report it to the police to avoid implications of possible misuse of the vehicles in criminal activities.

These lifted or snatched vehicles are being openly sold in Balochistan and other areas. The car snatching has become a flourishing business because of availability of easy outlet for the stolen vehicles. According to a report, the snatched vehicles are sold in the open market located near Almari Chowk in Khuzdar. The market is thronged by the traders of the stolen vehicles. This illegal trade is going on obviously in connivance with the police and the administration.


The continued heavy expenses on account of maintaining peace and order in the city have put the province of Sindh into a position where it overburdened with heavy overdrafts amounting to over Rs8 billion to the State Bank of Pakistan. Infact the overdraft had exceeded to an amount of Rs11 billion before imposition of the governor's rule in the province. An amount of Rs3 billion has been retired and Rs8 billion are still outstanding against the government of Sindh.

In order to retire the debt, the government of Sindh has decided to sell 23,758 acres of land and 65,607 plots in Karachi which are expected to fetch Rs19 billion. According to break up of the available plots in different parts of Karachi, 4,255 acres of land located in District Malir is estimated at Rs484.28 million, 8 acres of prize land worth Rs200.86 million in District East. The District Central has 216 acres of disposable land worth Rs130 million while District West has 15,499 acres worth Rs735.61 million. Moreover, 1,684 plots worth Rs844.4 million are owned by Karachi Municipal Corporation (KMC); 62,979 plots worth Rs9 billion are located in the jurisdiction of Malir Development Authority; 3,780 acres of disposable land worth Rs.7.3 billion is located in the area is controlled by Lyari Development Authority (LDA); and 944 plots worth Rs251.45 million are in the possession of KDA.


Gone are the days when Karachi used to be called as the cleanest city of the sub-continent. Presently over 15,000 industrial units located in different districts, discharge highly toxic waste. Besides polluting the atmosphere of the city, these units have converted the blue waters of Arabian coast into a septic tank. Thousands of tonnes of toxic waste is dumped into the sea everyday. The industrial waste containing poisonous chemicals and flowing into the sea has severally damaged the marine life and the beauty of the sea shore. The city generates around 7,000 tonnes of garbage daily which is also disposed of without proper treatment.

A study regarding environment problems, faced by the city, revealed that most of the institutional problems associated with environmental pollution are stated to be due to overlapping responsibilities and lack of coordination among various agencies. At present there is no single agency responsible for looking after the environmental hazards in Karachi.

A large number of commercial vehicles ply on Karachi roads without proper fitness. These unfit vehicles are out to emit dangerous smoke through their exhausts which cause serious health problems especially chest related diseases among the citizens.


There is a general complaint that the drinking water, supplied through pipeline network in Karachi, is contaminated. The eruption of various types of Hepatitis cases is evident from a large number of patients visiting almost every hospital operating in the city. Although there is a mushroom growth of companies selling different brands of the sterilized mineral water, yet the majority of the people, who belong to low income group, cannot afford to buy it.

The infrastructure in Karachi is characterized by fragmented management. The supply of drinking water in different parts of the city is the responsibility of different agencies including Karachi Development Authority (KDA), Karachi Water and Sewerage Board (KWSB), the cantonment boards, and the Defence Housing Authority. As a result of this fragmentation, there is no uniform level of services as different agencies use different planning for providing and looking after this important service. The water problem in Karachi has intensified due to massive growth of population and ill-planned industrialization.


The master plan for Karachi's mass transit system was drawn up some 20 years back. The mass transit programme was finalized in 1990. However, since then it has been tossed about which has not only caused needless delays in its implementation but also has added enormously to its overall cost.

The mass transit programme was chalked out to provide a respectable mode of transport to the people of this thickly populated city of distances. So far, the commuters are travelling in overpacked small buses risking their lives in traffic chaos all over the city.

This $586 million project is in the doldrums since its conception.

Some quarters are also creating hurdles in its way by raising imaginary concerns about its implications for the environment. Because of the prevailing economic hardships and uncertainty, it is still not clear how soon work would start on the mass transit programme. This project consists of two phases. In its first phase a 14 km corridor has to be constructed which would be connecting the Mereweather Tower with Karimabad with a partly elevated rail system. This important programme of mass transit in Karachi has almost been shelved due to financial constraints. The plea for delaying the project, which is the need of the hour, is however seems to be unjustified specially when the city is contributing a huge amount of road tax every year.


Under the prevailing situation of Karachi's unending road congestions and hardships faced by the commuters, telephone facility can play an important role in bringing the people into contact instantly. Although the telecommunication has been expanded to a great extent following the participation of the private sector in the telecommunication sector, yet the facility is still out of the access of a large segment of the society. However, high tariff is also keeping away the potential subscribers. By lowering tariff rates more rapid growth of the sector can ensure higher revenue generation as a huge number of subscribers would contribute a greater volume of revenue to the exchequer.

Upto the year 1989, Karachi had a total of 282,941 telephone lines.

According to the KDA master plan, by year 2000 the total number of phone lines is expected to increase from existing number 283,000 to 1,050,000. This increase in lines would raise telephone line densities for Karachi to 9.6 per 100 persons. The total demand was based on plans, developed by the Karachi Telecommunication Region for expansion of the system. The Pakistan Telecommunication Ltd had announced to introduce, a programme of free-local calls and a fixed amount of line rent between Rs500 to Rs700. This programme was widely welcomed by the existing subscribers and the potential customers. This would not only reduce the administrative cost of the PTCL but would also eliminate the frequent complaints of over billing by the consumers. If the scheme introduced the number of willing subscribers would definitely multiply many times.


During the year1995-96 the Central Board of Revenue (CBR) collected Rs568 billion or 89 per cent of total tax revenue of Federal and Provincial governments. Karachi's share in total revenue stood at 71 per cent. Apart from federal taxes, also a sizable amount, collected in the form of surcharge on petroleum and gas, export development surcharge and miscellaneous receipts.

Karachi collectorate yielded Rs331 million or 9.1 per cent of the total collection from the cement sector; Rs229 million or 6 per cent from cigarettes.

The collectorate collected Rs1,189 million i.e. 85 per cent of the total sales tax collection from the M.S products, beverages contributed Rs91 million or 13 per cent of the total sales tax in 1995-96, POL products contributed Rs689 million in 1995-96 from Karachi which occupied the highest position, sharing 98 per cent in the total collection. Remaining 2 per cent was collected from Peshawar and Hyderabad. Karachi collectorate, being a major contributor in total sales tax from processed fabrics reflected a decline from Rs351 million in 1994-95 to Rs312 million in 1995-96 or down by 11 per cent as compared to the previous year.

Lubricating oil from Karachi is another area having a share of 68 per cent in the total collection from the country. This item yielded Rs394 million during 1995-96. In the automobile sector the collectorate yielded Rs398 million in 1995-96, Paper and Paper board contributed Rs61 million in 1995-96 , Wire and Cables contributed Rs108 million in the said period from Karachi. This scenario gives a respectful picture of the revenue contribution by the industrial sector of Karachi.

It is believed that the potential tax payers prefer to go into an underhand deal with the corrupt officials of over 40 tax collecting agencies to remain out side the ambit of what they called the complex tax system. The complex tax system is one of the major reasons of the narrow tax base in the country. The decline in collection of revenue during the first half of the current financial year supports this argument. The revenue collection during the first half is amounted to Rs131 billion as against Rs134 billion during the corresponding period of last year. The CBR would have to collect at least Rs35 billion during each of the remaining six months to achieve the revised target.

The business community in Karachi is unanimous that the multiplicity of taxes be done away with. The multiplicity of taxes could be reduced by merging identical taxes and to facilitate their collection through one window operation.


PAGE believes that strategically located city of Karachi has the potential to respond to the perils faced by the national economy. At least a considerable amount of revenue, it generates, needed to be spent on improvement of infrastructure. The declining economic growth warrants for immediate remedial steps. It is, however, up to the authorities and the economic managers as how to remove the snags faced by the stalled pace of economic growth.