If you work for the Karachi Metropolitan Corporation (KMC) and are counting on a provident fund when you retire, you might want to rethink your chances.
After drying up the employees’ provident fund which its predecessor, the City District Government Karachi (CDGK), had used to finance many development projects it undertook, the KMC – as the administration is now called – has been struggling for the past couple of months to replenish the amount of over Rs3 billion. Already cash-strapped, it also faces problems in settling the dues of employees who retire. In some cases they even have to wait for up to a year before they receive their payments.
The money was used by the CDGK to pay private contractors, many of whom enjoy the support of different political parties.
The money trail
Provident fund is funded by the deductions from monthly salaries of KMC employees. The money was supposed to be invested in government securities to make interest income for the employees.
The amount was moved out of the pension fund of the CDGK. According to the income tax law, the fund should have been managed by a board of trustees whose members include employees’ representatives. But that never happened.
The KMC officials are tight-lipped about the matter and none of them is willing to speak on the record. But KMC’s financial adviser, Amir Khursheed, denied that anything like this ever happened.
“We maintained the fund in a separate account,” Khursheed said. But he did not give any more details. “All the employees are being paid upon retirement.”
However, another official told The Express Tribune, “It was illegal. The provident fund is managed by the trustees. We never had anyone looking after that. No one also bothered to carry out any investigation into the matter.”
Though the employees are being paid when they retire, but only the ones who are above grade 16. The lower-cadre officers have to wait for up to a year.
The chairman of Municipal Workers Union Alliance, Syed Zulfiqar Shah, said that it takes almost a year after retirement for the employees to get their dues. “Someone with good connections might get his or her dues in six months.”
The government is entitled to pay 17 percent interest on the total amount of provident fund, he said. “No one tried to make provident fund trust. The money was used in last two years of previous city government.”
According to one official, the KMC pays its retiring employees from its running expenses.
“Not only is it illegal but it also creates a lot of problems,” he said. “What if the revenues dry up? Provident fund is the right of every employee and has to be paid upon retirement.”
The fund is also supposed to help the employees if they face financial problem even during their service – and this is also a almost-never occurring practice at the KMC “They might need the money for marrying off their daughters or paying medical expenses.”
Not the first time
One officer, who used to head the finance department in the early 1990s, recalled that a similar proposal floated around. “But after a couple of briefings, the nazim realised that it would not be beneficial in any way and rejected the proposal.” The Karachi Development Authority (KDA), which works under the KMC, has also seen its provident fund being used for development purposes.
The KMC has been trying to put money in the provident fund from its savings. The organisation now deposits salary directly in the employees’ accounts to reduce corruption and this saves up quite a bit of revenue. In a recent drive, it identified over 3,000 fake employees who were drawing double salaries.
Correction: An earlier version of the story incorrectly stated the amount as “Rs3 million” instead of “Rs3 billion”. A correction has been made.
Published in The Express Tribune, June 28th, 2012.