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Saturday, May 7, 2011

Gross Financial Irregularity in Punjab: Funds Allocated for Clean Drinking Water Project Diverted to “Sasti Roti” Project

Punjab Government Suggests Closure of the Foreign Funded Program
By: Aijaz Ahmed
Punjab CM Shahbaz Sharif presiding over a meeting
Corruption and financial irregularities don’t seem to be limited to an individual or a single political party in Pakistan. One very often hears about the fabled corruption of the president of Pakistan and co-chairperson of PPP and also about the gross irregularities, mismanagement and corruption in the federal government. The accusers among others include the PML-N leaders who claim running a very clean government in the Punjab, the largest province in Pakistan. But as this report suggests their hands are not as clean either. They have engaged in financial irregularities and also seem to be playing gimmicks for short-term political gains at the cost of the welfare of the common men. 

The much-hyped clean government of the iron man # 2, Mian Shahbaz Sharif has been involved in certain gross financial irregularities, which have been strongly defended by party stalwarts with politics of counter allegations against their opponents.

In one instance, the provincial government tried to replace the federal governments’ initiative of financial support through Benazir Income Support Program with its own food stamp program, which proved a big failure. “Sasta Ramzan Bazar” (Cheap Ramzaan Bazaar) was another example of political gimmicks. During that program, large numbers of people would come to the distribution centers to get cheap wheat flour even in the posh localities of the major cities of Punjab. Several innocent people lost their lives in the stampedes caused due to the mismanagement by the authorities.

The Punjab government also redirected development funds allocated for the Southern Punjab towards such schemes having no real impact or benefit for the common men. The State Bank figures indicated that more than 70% of the development funds for Siraiki region were shifted to these programs. The “Sasti Roti” (Cheap Bread) Scheme also received severe criticism from across the country on this account.

The PML-N leadership blamed the federal government for the failure of the “Sasti Roti” Scheme. It became a major source of tension between the provincial government and the former Governor late Salman Taseer.

The scheme ate up a sum of 38 billion rupees in total, and according to the provincial government sources, major spending came from the projects initiated either by the federal government itself or through foreign funding. The Punjab government finally scrapped the Sasti Roti scheme after the Rs7.85 billion-loan debt accrued from commercial banks was left unpaid by the food department owing to non-provision of funds earmarked in the financial years 2009-10 and 2010-11.

Funds redirected towards the scheme included the amount allocated for a CDWA funded project of “Clean Drinking Water for All”. The Punjab government after paying initial mobilization amount to the contractor at district level redirected the remaining funds to the failed scheme. The funds released by the federal government amounted Rs. 1,961 million. However, only 285 safe and clean drinking water pumps were installed and no further payment was made to the contractor.

The amount was said to be redirected to take political mileage as the short sighted leadership considered the clean drinking water as a complete wastage or a source for political gain for the government in center. Thus, the provincial government instead of taking responsibility for the failure has asked the government through its project director to close the project.

In the letter sent through the planning division the provincial government has suggested that due to the shortage of funds it is impossible to implement the project in time, while the execution and completion dates have already passed.

Contrarily, the planning division in its summary sent to the Prime Minister House has started playing its own game. The summary reads as:
Subject:            Clean Drinking Water – A Golden Opportunity.

Pakistan is currently spending around PKR 50-60 Billion annually on its health bill. In a recent study carried out by UNICEF, it was determined that almost 20-40 % of hospital beds are occupied by patients suffering from Water Borne Diseases e.g. diarrhea, cholera, typhoid, polio, hepatitis A and E. It is estimated that over 230,000 children die a year because of diarrhea and typhoid.

The World Summit on Sustainable Development held in Johannesburg in 2002 set its plan of action for implementation of the Millennium Development Goals as under:
Halve by 2015 the proportion of people without sustainable access to safe drinking water”

“Safeguard human health, including reduction in the mortality rate (associated with lack of access to safe drinking water, inadequate sanitation and poor hygiene), by improving the quality of drinking water”

For the pilot phase, the project on “Clean Drinking Water Initiative” was approved and about Rs. 1.0 billion has been spent on it with installation of 406 water filtration plants of 2000/4000 liters/hour capacity in all Districts/Tehsil Headquarters of Pakistan including AJK/ GB and FATA.

The 2nd phase of the Project was named “Clean Drinking Water for All” (CDWA) project. It was planned to install 6626 water filtration plants of (2000/ 4000 liters/ hour); one in each Union Council of Pakistan.

Revised PC-1 was approved by ECNEC in November 2007 for Rs. 15,843 million.
The contracts of Sindh, Balochistan and KPK were signed in 2007, while the contracts of Punjab, AJK & ICT packets for UF plants and RO for Punjab packets were signed on 30th June 2009.

Total funds transferred by Federal Govt. to the Provinces/Regions on CDWA project is about Rs. 7 billion.

So far, the project has achieved substantial completion only in Balochistan, with 406 plants installed out of a total of 409 plants. In all the remaining provinces the project is incomplete due to several reasons and only about 1203 water filtration plants have been installed all over the country.

The worst situation is in Punjab, where out of 2895 plants only 285 have been installed although the contract was signed on 30th June 2009, with a completion period of 9 months.
Federal Govt. transferred Rs. 3,771 million to Punjab Govt. out of which it paid Rs. 1,810 million as first mobilization advance to the contactors. Thus Govt. of Punjab has Rs. 1,961 million funds remaining with them, out of which it has a contractual liability to pay 2nd mobilization advance and payments against work executed.

The Govt. of Punjab, in not making any further payments after the 1st mobilization advance, caused the work to be suspended. Now after devolution of the Projects to the provinces, Punjab Govt. is considering capping the project. However, doing so will most likely lead to litigation initiated by the contractors.

It is opined that in a bid to drive political mileage for PML (N), the Govt. of Punjab has diverted the funds to its “Sasti Roti” program, as it wants to project PML (N) as the only political party that wishes well for the poor.

The Govt. of Punjab considers that the CDWA Project being a Federal initiative, and having far-reaching positive results for the masses across the country, would not help PML (N) in its “popularity” drive. Hence the Govt. of Punjab is basically aiming at blocking the Federal Govt. from gaining the perceived appreciation.


Federalization of CDWA Project and Federal Govt. to become its Employer instead of Provincial Govt. and Federal PMU to administer the project execution.

The Govt. of Punjab may be asked to refund Rs. 1,961 million back to the Federal Govt. For further execution of the remaining project, necessary funds may be arranged under Shaheed Benazir Income Support / Welfare Programme.

If any other Province also decides to close this project then in national interest the Federal Govt. may also takeover it under the above mentioned programme.

The PPP parliamentarians at the Federal and Provincial levels to coordinate for the installation of the plants at the same locations as given under the contract, to prevent any conflict with the local administration.

According to the contract, Operation and Maintenance is the responsibility of the contractors for 3 years, thereby ensuring the initial success of the project’s execution. For onward execution, an arrangement to either lease out the plants to the same contractors for a further period as agreed, or to bring in fresh O&M contracting firms through a tendering process is proposed.

In this arrangement, the government would not have to bear any cost as the leasing arrangement would involve selling of treated water to the masses by the contractor. This would be done at extremely affordable prices e.g. Rs 0.50/liter for sweet water and Rs. 1.00 per liter for brackish water, while covering the operational costs.

In a nutshell, this program is focused at the basic need of providing clean drinking water to the masses and hence is strong social sector uplift and a means for Pakistan to fulfill its international obligations under the MDGs.”

However, the commission fails to understand the fall out of the decision in the changing political scenario that may lead towards political animosity between rival PPP and PML-N, which are at two poles apart at the moment. Federal government is yet to decide about the project, however, closure of the project will be difficult one for it as it will squeeze further its chances to rebuild already damaged reputation in the global financial market.

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