Let Karachi live again

But then why should the federal and provincial governments make special provisions for Karachi’s developmental gaps?

Mohammad Younus Dagha January 18, 2022
The writer is a former federal secretary Finance and currently working as Chairman, Policy Advisory Board of FPCCI


[Cities] offer the greatest potential to drive growth… The future of humanity, in large part, will be a story written by cities.—Peter Scher

Pakistan has eight cities with populations of more than a million souls, as per the last census. Punjab has five of these cities, Sindh two and Khyber-Pakhtunkhwa one. The way we prepare and maintain these engines of growth to compete in the global economy will determine the future of our economy.

Karachi, with roughly 10% of country’s population, contributes to more than 50% of its export earnings, around 56% to the Federal revenues and 96% of Sindh’s revenues. Karachi pays in Sales Tax on Services almost equal to the Sales Tax on Services paid by the entire province of Punjab.

World Bank in its report ‘Transforming Karachi into a liveable and competitive megacity (2017)’ made out a case that it will take Karachi around $10 billion of capital investment to close the infrastructure gaps in the city.

“… with 45 residents competing for one bus seat, travel within the city is difficult. Many households rely on private vendors who sell water from tankers at high prices. The sewage network has not been well maintained since the 1960s. Industrial waste, which contains hazardous materials and heavy oils, is dumped directly into the sea untreated. Of the 12,000 tons of municipal solid waste generated each day, 60% never reaches a dumpsite.” Karachi’s pattern of growth appears to be on the brink of an unsustainable path.

Federal and provincial governments heeded the report only after heavy rains in 2020 inundated Karachi when both the governments fiercely contended that they would contribute more in the joint package of Rs1100 billion for the Karachi Transformation Plan which was to be implemented in three years. The progress is far behind the promised schedule after eighteen months.

But then why should the federal and provincial governments make special provisions for Karachi’s developmental gaps?

Provinces became mega-rich after the 2009 NFC award, which devolved fiscal authority of collection of Sales Tax on Services and unprecedentedly higher distribution of funds from federal divisible pool in their favour. Sindh’s revenues grew 815% in past 15 years from Rs178 billion in 2007-08 to Rs1,452 billion in the Budget 2021-22. This prosperity should have turned its capital city into a resourceful metropolis rather than becoming one of the least liveable cities of the world.

Karachi’s share in transfers from the provincial budget fell from 20% (Rs37 billion) in 2007-08 to a meagre 3% (Rs38 billion) in 2020-21. Had the transfer percentage of 2007-08 maintained, Karachi would have received around Rs244 billion in 2020-21. Around 85% of Karachi’s dues are being regularly withheld since 2009 when the Provincial Finance Commission was turned dysfunctional.

Similarly the share of 6.6% in Federal PSDP that Karachi had in 2007-08 dropped to just 2.1% in 2021-22. In very conservative estimates, these cuts by the provincial and federal governments deprived Karachi of Rs949 billion since 2009 (Rs663 billion by the provincial government and Rs286 billion by the federal government) almost equal to the cost of infrastructure gaps found in the World Bank report, rather more in net present value. The largesse of Karachi Transformation Plan is nothing but just a promise to return back part of the funds of the city withheld by both the governments.

This imprudent behaviour towards Karachi, our largest growth engine, is not in the interest of the country if we have any plans towards achieving economic growth and prosperity. Keeping Karachi continuously on the verge of collapse is also not good for the unity and peace of the province. How can a province protect its claims on the devolved rights under the Constitution and share in NFC award, when itself in violation of Article 140A of the Constitution which makes it mandatory to “devolve political, administrative and financial responsibility and authority to the elected representatives of the local governments”.

The equitable distribution of the Provincial resources to the districts must be revived through a new Provincial Finance Commission Award, pending since 2009. Karachi should be getting Rs250-300 billion as direct transfers annually instead of Rs38 billion received last year, Badin Rs18 billion as against 1.6 billion and Umerkot Rs20 billion as against less than a billion.

There can’t be any justification for the garbage collection contracts to be decided by the Chief Minister. This over-centralisation is as unreasonable as the over-devolution by the Musharraf regime. Municipal functions must be performed by the City governments such as Water, Sanitation (Sewerage and Solid Waste Management), Municipal Taxation & Regulation, Master Plan and Building Control, City Development (KDA, LDA, etc), City Transport and Mass Transit. Property and Motor Vehicle Taxes also need to be devolved to the districts.

Let our cities, our engines of growth, become vibrant and competitive — contributing to their fullest potential towards the growth of our country.

Published in The Express Tribune, January 18th, 2022.

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