Toyota Corolla, 2006 model, well maintained. Asking price: Rs330,000.
The offer above is not a fluke. It is made by the government to top bureaucrats, under its monetisation of transport facility policy recently approved by the prime minister.
Under the policy, the government has given civil servants, from grade 20 to 22, the option to purchase cars allocated to them on depreciated prices.
The policy was formulated in light of revelations that top civil servants were using more cars than designated to them, and causing billions of rupees in loss to the exchequer on account of fuel expenses.
Benevolence of accounting
So how does a 2006 Toyota Corolla come down to one-third its market price in five years? The benevolence of accounting tricks.
Depreciation, a standard accounting practice, slashes the value of an asset on account of its physical wear-and-tear. There is no standard depreciation formula though, and each organisation can formulate its own, as long as it keeps it consistent.
Under the new rules, the government has changed its rules of depreciation.
From an earlier policy of depreciating 15% in the first year, and 10% in subsequent years, the government has allowed for 15% depreciation for each year of the vehicle’s life.
According to the new formula, therefore, a 1300cc car purchased in 2006 at Rs870,000 will have a depreciated value of Rs330,000 on January 1, 2012.
Market value of a similar car, of course, is much higher. “A well-maintained 2006 Corolla is available in the market for about Rs1 million, while one in an average condition is available between Rs900,000 and Rs950,000,” said Raja Safeer, owner of an automobile showroom in Islamabad.
Other perks
The bureaucrats would not only get the cars at a deeply discounted price, they have also been allowed to pay the amount in monthly installments. Monetisation rules state, “the recovery of installments of the depreciated price of the vehicle shall be fixed at no less than Rs 25,000 per month.”
They can also hire official cars at a nominal rate of Rs3.6 per kilometre, according to the rules. While the government had initially announced that after trading in cash for cars, officials would be responsible for their own transport, the new rules states that “one 1300cc vehicle will be maintained for protocol/operational duties by the entitled officers.”
Interestingly, secretaries of the divisions and ministries have been tasked to certify that officials who have opted for monetisation policy are not using project or departmental vehicles. The secretaries themselves, however, have been found misusing three to four vehicles.
Published in The Express Tribune, December 21st, 2011.
COMMENTS (38)
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So how much for a 2006 (Government Number Plate) Landcruisers, Range Rovers, BMW X5s, Vigos etc which i am sure people must have seen in Karachi. (i saw a protocol, not big in terms of the number of cars but yes as far as the worth of the vehicles is concerned it was BIG: 2 police mobiles and in between them a Black Range Rover Vogue, a Black Lexus LX 470 and a Black BMW X5 each holding a green fancy 'GP' number plate...) I really need to get one, any official selling the car at depreciated value please dooo lettt meee knowww :D...
...........and you ask why the common man is desperately looking towards the PTI .
@minhas: many companies around the world offer their employees this option"
COMPANIES who buy with their own money, NOT COUNTRIES. This money belongs to people of Pakistan.
@Not me: The correct figure is 1.8 million and if you add those that have tax deducted at source the figure jumps to 45 million.
I am not saying that we have a good tax system but those are the facts.
This is good thought that government is planning to opt for. But there are so many ifs and buts attached to this future practice. The tendency within Pakistani bureaucracy has been miss-using their authority. Rather than giving more perks to bring down expenditure, government should focus perhaps on thinking ways to trim down the level of corruption and increasing control over miss use of government properties. Private companies follow the practice of offering official vehicles to their employees at depreciated value worldwide, but at the same time they ensure legitimate controlling over the use of other company assets. This policy is certainly not going to decrease load of expenditures on government as being senior officers, grade 20-21, would easily hire other official vehicles at such inexpensive rate of Rs. 3.50 per kilometer, perhaps in the name of official duty. At least government should bring the per hour usage rate at market level as well to encourage officers to use their own vehicles. Good thing about this policy is, there are going to be less green plated cars on the roads, the drivers of which threaten sometime life of others on roads through their highly risky driving, most of the time doing zigzags and high speeding, considering no one can question them.
This is a clear violation of Public Procurement Regulatory Authority rules. Which state tht assets be auctioned off like they are normally done.
ET please hire some professional accountants, as this is a world class practice and totally acceptable all over the world. We are very depressed people, we always complain even if government action are RIGHT. and i am surprised at the public comments above, what a public we are ...
@minhas. Its true this system is used by companies all over the world to provide an incentive to their employees that doesnt cost the company anything. The company shows this as operating cost and gets a tax break from the government. But the Government of Pakistan is not a private company. Governments everywhere in the world use the process of auctioning their vehicles as a tax break is of no use to the Government, it's their money anyway. The best way to recoup your money is to auction your vehicles in the free market.
Comments from Mr. Minhas, Meekal Ahmed for the IAS to which Pakistan is compliant. Here the Government grade officers which mostly prefered a standardised car model/brand Toyota Corolla which is locally produced on the specs., reccomended for Pakistan. Toyota has made this car specially on specifications, stipulated for conditions in Pakistan, as road condition, fuel as RON grade of gasoline/petrol, leaded, or un-leaded, and CNG, climatic condition, etc., The car has life cycle based to last much more than the IAS adopted for Pakistan under this condition of depreciation. From the year 1993 when first Toyota Corolla was produced almost all the cars are road worthy subject to normal maintenance. It is more important for the Govenment offices to have funds for maintenance of cars, and not to purchase the car if they do not have enough money for the maintenance per se. The Governmental assets as cars, which are best of technology available in Pakistan should not be rotten for writing off assets which last decades.
Who is eating the costs? Is this another bribery scheme?
these crappy, ugly cars are worth even less, Pakistani public has always been fooled by these automobile companies and the governments.
Its the perfect bureaucratic plan. Not only will they buy the latest cars at throw away prices, they will get plenty of additional money every month, and will continue using government cars from the staff car pool free of cost. Typical of bureaucrats. I would suggest watching Yes, Minister and Yes, Prime Minister, on how the bureaucracy works.
On this exact topic:
http://www.tubeplus.me/player/1585266/Yes%2CPrimeMinister/season1/episode5/ARealPartnership/
What's wrong in it? Happens in most of the companies. It's so normal!
@minhas: True. But who knows what the book value is? maybe they buy "after a loss on sale" to the counter party. Who knows what depreciation method they use? Accelerated? etc. I do believe we have read countless stories of filling one's pockets and / or buying assets at highly subsidized rates. I do believe you're right but people find ways around the situations , or lets say look for loopholes.
In Pakistan Bureaucracy is the bane ...
they deserve it.
@ Minhas, you are a qualified CA, but you don't understand difference between public money and private company's money. When market value is more than double of depreciated value, then they should pay market value. Would they still buy these cars, if market value had been less than depreciated value? This is public money and as government officers its their duty to honestly use it. Media and general public is right to demand accountability. No government official is authorised to bring loss to public exchequre. These cars should be auctioned in public and if these officers want to buy them in open competition, then its a fair game.
Most big private firms have the same option. I dont see a problem here.
This must already be a common practice in the army.
What a rip off.!! No wonder only 5,00,000 people pay Income Tax
@Nadir: Whats the Big deal!! LOL. The stooges of this government are hilarious, Why don't they offer these cars to the poor for monthly installments ever thought about that nope. An elitist government serving the elites too bad you can't see that.
Bureaucrats should be respected and that is all i can say!!
Anyone of them drives cheaper than Mercedes Benz or BMW 7-series?
Vote for Imran Khan and I guarantee all of this will stop!
Ugly cars
A 2006 Toyota Corolla for 33,00,000?
Pakistan needs to find someone who is enterprising and can publish what is called in the US a "Blue Book". I don't know why someone has not thought of this before.
Based on market survey's, the Blue Book is an authoritative source of valuation. If you want to know what your car is worth, consult the Blue Book value first. Then you can add things like low mileage, excellent or fair condition and other things that increase its value -- or subtract from it.
Otherwise you will get a scandal which we seem very competent in arriving at.
Everything we touch, no matter how good the idea, becomes a nationwide scandal and an outrage.
Is there no Blue Book in Pakistan and no market valuation based on survey's that are constantly up-dated and provide an authentic source of reference?
Of course, this applies to valuation in other sectors of the economy -- such as private and commercial property which should be taxed not on some historic cost basis but on current market value.
Well the depreciation may be a bit excessive, but have you seen the state of official cars and the way they are used? And once the cars are gone they are gone. If expenses are monetised then future brueacrats wont have this option and the government will be free from having to maintain vehciles. Government officers including Army officers get to pay for plots in monthly installments whats the big deal?
As a qualified Chartered Accountant (icaew) this is perfectly acceptable practice (as per IAS16 international standard). the car can be bought at book value.. many companies around the world offer their employees this option, esp when the employee is using the company car. the government maybe corrupt but the media cant really point fingers on this issue.... sorry to burst your bubble ..
Out of curiosity, what will prevent them from buying the subsidized car at one third of value and selling it in the market for full value making a sizable chunk in profits with this round-about transaction?
Well at least they will start taking care of these cars!