ISLAMABAD, Sept 29: The federal government is in a fix over a decision of the City District Government of Karachi (CDGK) to use Rs12 billion from the Employees Benevolent and Katchi Abadi funds for a media city project because rules do not allow such transfer.

Sources told Dawn the city government had originally planned to raise money from a banking consortium led by Dubai Islamic Bank by using these funds as collateral. The bank expressed its inability to accept the funds as a legal security because those were purpose-specific. Legal advisers to the media city endorsed the bank’s viewpoint.

Subsequently, the money was diverted from the two funds to open fresh bank accounts in the name of the CDGK. The move provided initial funds for the project planned on the pattern of Dubai Media City.

However, the Sindh government is reported to have drawn the attention of the federal government to the use of the Employees’ Benevolent Fund and Katchi Abadi Fund or similar other special funds for commercial or development projects.

The federal government also believes that laws did not allow diversion of welfare funds for development or commercial projects.

In certain cases, the laws do allow investments by funds specifically set up for welfare projects, provided the investments and profits thereof go directly to the welfare schemes of the sections of society for which the funds were established in the first place.

The city government has already allocated more than 100 acres of land for the project, which would house offices, accommodation, IT, satellite and television up-linking facilities.

The land would be provided free on long-term leases to media houses, particularly television channels to attract private sector investment through tax exemptions and other facilities.

The sources said the project was aimed at attracting foreign as well as domestic investments in the electronic media and the city government expected to get more than Rs40 billion, including $400 million from foreign investors.

A senior federal government official said the previous government once considered utilisation of welfare funds, like workers’ welfare fund and benevolent fund, for mega infrastructure and investment projects to trigger economic activities. However, it was noted that a proper legal system had to be put in place to avoid misuse and wastage.

He said billions of rupees were lying with the workers’ welfare fund that could be utilised positively but laws would have to be amended.