LAHORE: Prominent insurance companies are reluctant to extend insurance services to vehicles of the Yellow Cab Scheme (YCS) worth Rs10.5 billion introduced by the Punjab government, The Express Tribune has learnt. This could cause a setback to the much-hyped redressal of unemployment in the province, an official requesting anonymity said.
Insurance companies fear that the scheme was “ill-planned and politically motivated” which may cause them financial damage, said the official. An insurance company owned by a prominent banker working as adviser in the said scheme expressed no interest in insuring the vehicles, he added.
In the annual 2011-12 budget, the Punjab government announced an allocation of Rs4.5 billion to launch the YCS for the unemployed youth of the province. It was decided that 20,000 taxis and Bolans would be provided to young people with an intermediate qualification in order for them to run a respectable business.
Of the total number, 8,000 taxis would be provided to the youth with domiciles of South Punjab, and of the total vehicles, 12,000 would be Suzuki Mehrans and the remaining 8,000 would be Bolans. The price of a Bolan was calculated at Rs5,55,000 and Rs4,70,000 for a Mehran.
The government allocated a quota to every district according to its density. A maximum number of 1,627 vehicles were allocated for Lahore, whereas, Hafizabad was to receive a minimum of 191 cabs.
The Punjab government fixed July 30 for the submission of applications from eligible candidates, however, it had to extend the deadline to August 15 and relax the eligibility criteria due to the poor response it received.
The total outlay of the scheme was calculated at Rs10.5 billion, out of which 20 per cent was to be deposited by the applicants as down payment.
Of the remaining Rs8.5 billion, the Punjab government would pay Rs4.5 billion and the remaining funds would be financed by the Bank of Punjab (BoP) at an interest rate of Kibor, in addition to 2.5 per cent. The Punjab government would alone bear this interest and the drivers would be provided interest-free vehicles on installments.
The BoP, with the technical support of the Punjab Information Technology Board (PITB) was establishing digital data to be used for balloting, scheduled in 10 districts on August 29 under the supervision of provincial ministers. The government would then hand over the vehicles to the drivers on October 10.
The BoP which was funding the project invited insurance companies to ink an agreement for the insurance of the YCS vehicles. However, the bank received a very discouraging response as some huge insurance companies refrained from applying, a bank official requesting anonymity told The Express Tribune.
He said most of the companies which insured vehicles of the YCS in 1993 faced huge losses, which is why they were reluctant to commit to the same scheme this time around.
If these vehicles are not insured, the drivers will have to face a loss in case of theft, accident or any other mishap, he added.
Big companies are least interested in doing business under such schemes because they are more risky since the vehicles were rented out, said Abdul Hafeez, a senior official of a prominent insurance company. He said the YCS appears to be “ill-planned” and “politically motivated”.
Insurance companies normally give preference to company-owned vehicles, considering it a secure investment.
The reason that big insurance companies are reluctant to insure the YCS vehicles is not true, said Liaqat Ali, a senior official of the BoP. A good number of companies submitted quotations for the job, he added.
A committee headed by a chief risk officer will scrutinise/evaluate the documents, balance sheets, accounts and profiles of these companies. An agreement would be signed with financially strong and vibrant companies, while the number of vehicles for insurance would be distributed among the selected companies, he said.
Published in The Express Tribune, August 17th, 2011.