TARIQ AHMED SAEEDI
June 7 - 13, 2010
Chinese-based banks are willing to sanction soft loans for the financing of CNG buses project in Karachi as commercial banks of the country have apparently distanced themselves from the project in view of bitter experiences of some banks falling in to the mess of bad debts following defaults of public buses' operators in past, said a well-placed senior official in Karachi Mass Transit Cell.
The Chinese banks have offered soft loans for the project at a nominal rate of 4 per cent, but they are seeking sovereign guarantees, Mirza Anwar Baig, Director Planning and Coordination Karachi Mass Transit Cell told Page during an interview. The mark-up rate is much below the 10 per cent local banks were said to factor in loans for the project.
This guarantee is a privilege of the government. City district government might have taken on this task. However, the dissolution of elected local bodies after completion of its tenure transferred the power to provincial or federal government.
State Bank of Pakistan on the directives of federal government constituted a syndicate of six local commercial banks to finance the CNG buses projects. Nevertheless, the local banks are reluctant to follow the orders, according to the director. He dubbed them half-hearted in involving such a mega project, saying which will not only give healthy returns to the operators but also to the financiers.
Federal government has announced to induct CNG buses in the nine cities of Pakistan on public-private partnership basis. Out of total 8,000 buses planned for all these cities, 4,000 buses were planned for Karachi. In the first phase, we hope to launch 226 buses, said Mirza Baig. Since it is a public-private project, government and private sector will have 20 per cent and 80 per cent equities respectively, he replied to a question. However, the government will subsidise 0.66 million rupees for each bus. The cost of a bus was estimated some time back at Rs3.6 million. Yet, given the volatility in the cost of production it will not likely to stay the same. He said government allocated Rs5 billion for the CNG bus project in the development expenditures of outgoing fiscal year. The project is attractive for all stakeholders, he said, "Particularly its internal rate of return is between 30 to 70 per cent". Yes, we have selected six operators following a transparent bidding process, he said to a query. They all are educated with prior good records, he remarked. Each operator is required to have at least 25 buses.
The KMTC has designated 40 routes called green routes for the buses. Lack of funds seems to be the main stumbling stone in the way of spacious and environment friendly public transport buses plying on the road. Director KMTC Zahirul Islam is optimistic about the operationalisation of the project soon. He told Page we were in negotiation with the banks and would attain successful outcomes in the near future.
RUNDOWN PUBLIC TRANSPORTATION
Karachi is the financial hub of the country with population probably exceeding 16 million. Japan International Cooperation Agency in its study noted in 2008 more than 6.9 people commuted on public buses while motorcycle users were 2.3 million and car users 3.3 million. Comparing the density of population with numbers of public transport vehicles endorses the importance of increasing numbers of public buses. The existing public transport vehicles are in absolute dilapidated conditions besides their being few in numbers. Need of commuters-comfortable public transportations has been repeated several times in the past as well.
Different governments have tried to lay down a proper public transport system in the city, but all attempts met failure in a short span after they began. Anwar Baig said KMTC had completed study on public transport system back in 2006 after realising that if measures were not taken to address transport issues of this mega city immediately, the problems would become uncontrollable. Numbers of passengers have outnumbered available buses. Karachi has the highest ratio of passengers per public transport vehicle as compared to that in New Delhi and other cities of its stature.
Such mega projects that need substantial financing from the lenders are often to be besieged with financial anomalies as happened during the first tenure of the local government in Karachi. Urban Transport System (UTS) was launched with much fanfare but without adequate planning and studies, which were soon manifested in the breakdown of the system. From procurement of buses to selection of operators to post-management, all aspects of UTS were full of blunders. Without verifying the creditworthiness of operators sizeable loans were granted thereby banks resorted to foreclosures following defaults on payments. A source privy to the process said contracts were assigned on favouritism and political cronyism. Big buses were purchased without assessing the compatibility of them with the local climate. The extent of desultoriness in planning was also judged from the fact that local government at that time never bothered to construct infrastructure required for such a public transport system. Road networks, bus stops, depots all were shifted to down in the list of priorities.
The succeeding administration of the city with controls over scattered areas changed the outlook of the metropolis, a fact that is acclaimed locally as well as internationally. Extensive networks of roads, flyovers, and underpasses were laid down across the city, redefining the commuting experiences. A time-taking and money-eating infrastructure building brought about a turnaround. This should have been followed by a much-required public transport system in accordance with the needs. Unfortunately, the term of local bodies was expired leaving people gasping for breath amid carbon emitting public transport vehicles. People pinned hopes on the city district government and welcomed with open arms the introduction of CNG buses in different routes of Karachi. Gainsaying is the fact that numbers of buses are not enough to untie the knots the transport imbroglio has tied. The city administration paved the way for public- and environment-friendly and low-fared transport system by inducting fifty CNG-combusted buses and soured the sentiments of bureaucracy obsessed with procedural syndrome.