ISLAMABAD (February 07 2010): The Executive Committee of the National Economic Council (Ecnec) has cleared the compressed natural gas (CNG) buses project, costing Rs 5 billion, without ensuring fuel supply to the 8,000 buses to be specified only for intra-city routes instead of intercity.

These buses will be operated in 10 big cities of Pakistan--Karachi, Lahore, Rawalpindi/Islamabad, Faisalabad, Multan, Quetta, Hyderabad, Peshawar, Gujranwala and Sukkur-on public-private partnership (PPP) basis, so as to address the public transport problems, besides improving environmental conditions.

The federal government will meet the interest component (partial) of the capital cost of buses to be inducted on leasing from financial institutions by the private sector bus investors. Out of the estimated 8,000 buses, 4,000 buses will be earmarked for Karachi, and the remaining 4,000 will be for the rest of nine mega cities, sources said.

The revised umbrella project was considered by the Central Development Working Party (CDWP) on April 30, 2009 which recommended this facility for ten mega cities on PPP basis at a cost of Rs 5 billion without involving Foreign Exchange Component (FEC).

The funds would be provided to defray the interest part of the cost of buses to be inducted on lease from financial institutions by the private sector bus operators over a period of five years, subject to the following conditions: (i) models approved by the Cabinet on July 16, 2008 would be followed; (ii) to oversee and for effective implementation of umbrella project in ten mega cities, a Project Management Unit (PMU) including National Project Director (NPD) along with Terms of References (ToRs) and salary package would be prepared by the Ministry of Environment in consultation with Finance Ministry and P&D Division.

The cost of PMU would be met out of balance cost of Rs 2.5 billion; (iii) proper implementation plan for approval of sub-projects in mega cities, route planning, land use, provision of CNG pressure stations other than Karachi and allowed components (social, physical) required for effective implementation of scheme would be developed; (iv) to encourage local bus manufacturing industry, diesel buses be converted into CNG system and included in the revised scheme; (v) Karachi Mass Transit Cell (KMTC), City District Government Karachi (CDGK) should launch schemes in Karachi in line with the already approved project.

Funds would be provided out of the due share of current years PSDP allocation of Rs 500 million for the project; and (iv) Presidential directive regarding provision of fifty percent seats for women and title to be in the name of female owners may be kept in view while executing the project.

The modified PC-1 would be submitted to the Planning Division expeditiously; thereafter a summary would be submitted for consideration of the Encec. Sources said the Environment Ministry informed Ecnec in its meeting on January 21, 2010, and in pursuance of the CDWP decision, that it had submitted a modified PC-1 to the Planning Commission along with the directives given by the CDWP. However, during discussion no specific commitment was made by the Ministry of Petroleum and Natural Resources.

Enenc, sources said, approved the project at a cost of Rs 5 billion without FEC in addition to the following: ( i) The facility as part of the 'urban transport system' would be for intra-city only in all the mega cities and not for intercity; (ii) 50 percent of total buses will be for Karachi.

For the remaining 50 percent buses, Ecnec authorised the steering committee to approve sub-projects remaining with the overall cost of the project including for other districts not covered under the instant scope, but may qualify for such facility during implementation stages of the project; and (iii) considering the government policy on gas management for the consumers, Ministry of Petroleum and Natural Resources was directed to submit a summary to the Economic Co-ordination Committee (ECC) of the Cabinet for ensuring smooth supply of CNG for effective and successful operation of CNG buses project.

Sources said that the original project sponsored by the Planning Commission and approved by the Ecnec on October 25, 2007 at a cost of Rs 5 billion was exclusively for Karachi. For effective implementation of Karachi CNG bus project a project implementation and Monitoring Unit (PIMU) under KMTC, CDGK, was approved by the CDWP on November 3, 2007 at a cost of Rs 70.839 million without FEC.

It was decided by the CDWP that the cost of PIMU would be met out of the cost of Rs 2.5 billion for Karachi bus project. Following approval of PIMU, all formalities have been completed by KMTC, CDGK and staff recruitment completed and the project is ready to kick off.

With fixed bus price of Rs 3.6 million and the bank interest rate of 10 percent per annum, the cost of interest subsidy over 5 years works out at Rs 677,181 per bus. Overall progress on the project remained slow due to the fact that the only incentive for the bus investors was subsidy on the interest component.