Metro bus subsidy sharing: Shahbaz implores PM to reconsider ‘unworkable’ formula
Dispute causes CDA to halt Rs375m federal govt subsidy for Punjab
Punjab Chief Minister Shahbaz Sharif. PHOTO: APP
ISLAMABAD:
The Punjab government has termed the federal government’s suggested subsidy sharing formula for the twin-city metro bus project “unworkable”.
Punjab Chief Minister Shahbaz Sharif has sought “urgent intervention” of Prime Minister Nawaz Sharif on the long-pending settlement.
The PM’s intervention has been sought through a letter – available with The Express Tribune – written recently by the Punjab’s CM.
Though the project has been operational since June, both governments have yet to finalise a formula to share nearly Rs2 billion per annum in subsidies for the project.
Due to the ongoing dispute, the Capital Development Authority (CDA) — which is overseeing the project on behalf of the federal government — has stopped the release of a first quarter subsidy of Rs375 million to Punjab by the federal government.
Owing to the undecided nature of a sharing formula, the CDA has yet to formally sign an agreement on behalf of the government with Punjab.
Contents of the letter suggest the federal government wants an equal sharing (50:50) arrangement for the subsidy, stating that the centre shared equally in the Rs45 billion cost of the project.
However, the provincial government is of the view that the formula should be based on length of track in Rawalpindi and Islamabad, rather than passenger load or equal sharing.
In his letter to the PM, the chief minister said, “The subsidy sharing formula proposed by the federal government on 50:50 basis is not workable, as it will saddle the provincial government with extra financial strain to sustain bus operations in the federal areas.”
The CM further wrote that the operational costs of the project are directly linked with the length of the corridor, and the number of metro stations falling in both Rawalpindi and Islamabad.
Rawalpindi contains 8.6 kilometres (km) of metro corridor and 10 stations, while a 14.6km corridor and 14 stations fall in the capital.
If the subsidy is calculated on Punjab’s suggestion, the federal government will have to share 60 per cent, or Rs1.2 billion, of the total subsidy, with Punjab contributing the rest.
According to a Punjab Metro Bus Authority official, the operational cost of the project is around Rs2.8 billion per annum, with an income per annum of around Rs766 million — requiring an annual subsidy of around Rs2 billion.
“I will earnestly request you [PM] to kindly reconsider the stance of the federal government, as the subsidy sharing formula already proposed by us [Punjab] is not only equitable but also sustainable. It will obviate the possibility of any future friction between the governments in the times to come,” the CM wrote.
Show me the money
The CM also said the federal government should make an upfront payment of the subsidy rather than releasing it at the end of each quarter, dubbing the practice “unworkable”.
“Payments to service providers are made monthly. Therefore, it is essential that the subsidy be released upfront to meet contractual operations in a timely manner,” the letter said.
The federal government released a first quarter subsidy of Rs375 million to CDA almost a month ago.
A senior CDA officer said the cabinet division had sought a response to the CM’s letter from the civic agency’s finance wing.
“Finance has written to the Cabinet Division that the federal government’s stance over the issue is just; if the government wants to share more, as Punjab desires, it is free to do so,” the official added.
Published in The Express Tribune, October 19th, 2015.
The Punjab government has termed the federal government’s suggested subsidy sharing formula for the twin-city metro bus project “unworkable”.
Punjab Chief Minister Shahbaz Sharif has sought “urgent intervention” of Prime Minister Nawaz Sharif on the long-pending settlement.
The PM’s intervention has been sought through a letter – available with The Express Tribune – written recently by the Punjab’s CM.
Though the project has been operational since June, both governments have yet to finalise a formula to share nearly Rs2 billion per annum in subsidies for the project.
Due to the ongoing dispute, the Capital Development Authority (CDA) — which is overseeing the project on behalf of the federal government — has stopped the release of a first quarter subsidy of Rs375 million to Punjab by the federal government.
Owing to the undecided nature of a sharing formula, the CDA has yet to formally sign an agreement on behalf of the government with Punjab.
Contents of the letter suggest the federal government wants an equal sharing (50:50) arrangement for the subsidy, stating that the centre shared equally in the Rs45 billion cost of the project.
However, the provincial government is of the view that the formula should be based on length of track in Rawalpindi and Islamabad, rather than passenger load or equal sharing.
In his letter to the PM, the chief minister said, “The subsidy sharing formula proposed by the federal government on 50:50 basis is not workable, as it will saddle the provincial government with extra financial strain to sustain bus operations in the federal areas.”
The CM further wrote that the operational costs of the project are directly linked with the length of the corridor, and the number of metro stations falling in both Rawalpindi and Islamabad.
Rawalpindi contains 8.6 kilometres (km) of metro corridor and 10 stations, while a 14.6km corridor and 14 stations fall in the capital.
If the subsidy is calculated on Punjab’s suggestion, the federal government will have to share 60 per cent, or Rs1.2 billion, of the total subsidy, with Punjab contributing the rest.
According to a Punjab Metro Bus Authority official, the operational cost of the project is around Rs2.8 billion per annum, with an income per annum of around Rs766 million — requiring an annual subsidy of around Rs2 billion.
“I will earnestly request you [PM] to kindly reconsider the stance of the federal government, as the subsidy sharing formula already proposed by us [Punjab] is not only equitable but also sustainable. It will obviate the possibility of any future friction between the governments in the times to come,” the CM wrote.
Show me the money
The CM also said the federal government should make an upfront payment of the subsidy rather than releasing it at the end of each quarter, dubbing the practice “unworkable”.
“Payments to service providers are made monthly. Therefore, it is essential that the subsidy be released upfront to meet contractual operations in a timely manner,” the letter said.
The federal government released a first quarter subsidy of Rs375 million to CDA almost a month ago.
A senior CDA officer said the cabinet division had sought a response to the CM’s letter from the civic agency’s finance wing.
“Finance has written to the Cabinet Division that the federal government’s stance over the issue is just; if the government wants to share more, as Punjab desires, it is free to do so,” the official added.
Published in The Express Tribune, October 19th, 2015.