A federal secretary who retired during the fag end of General Ziaul Haq’s rule once said that if all the summaries that various ministries had sent up to the federal cabinet for approval since independence were de-classified today and made public, most of those who wrote those summaries and those who approved them, if they are still alive, would both be lynched by the public.

He made this observation in answer to a query that if the textile quota policy which he was claiming to be the product of his own personal wisdom was as good as he was trying to make it appear, then why no one was being held accountable for formulating the previous policy which he thought was so bad.

What he was trying to explain was that the element of non-transparency that exists in the decision-making process at the highest echelons in the government provides the decision makers the cover needed to indulge in corruption and protect their inefficiency as well from the public gaze. However, at times when immediately following a decision, some interested parties go public with facts and figures questioning the decision, lengthy explanations are made by the concerned authorities either to confuse the whole issue or to point out that those questioning the decision were either idiots of first order or did not have the full facts of the case in their possession.

This has happened a number of times both during the democratic governments as well as in military regimes. However, during democratic regimes such questioning, more often than not assume the proportion of scandals because the political opposition which is always on the lookout for ammunition to beat the ruling party with, gets behind such questioning and gives voice to it in the parliament and in the press and sometimes even goes to the court with those questions. But during the military regimes, the element of non-transparency assumes a kind of respectability and minions of the government even dare come out with most brazen-faced defence of the decisions taken by their superiors knowing very well that the political opposition which has already been discredited by the military rulers using the propaganda tools in their hands (TV, Radio and’patriotic’press) would not dare echo these questions. And the judiciary functioning under the PCO dare not entertain such questions in their august precincts.

Here is the latest example of this kind of blatant defence of the decision taken by the government with respect to the Pindi-Bhattian-Faisalabad motorway project. The following is the full-text of the clarification issued by the National Highway (NHA) in response to a Dawn story ( Motorway contract awarded despite objections—March 19, 2002). The brazenness of the clarification comes out with stunning clarity without any help from this scribe if it is read along with the summary ( reproduced verbatim at the end of the clarification) sent to the Ecnec by the Planning and Development Division.

The clarification: The article has allegedly been based on information provided by responsible officers in the Planning Commission. it appears that most of the relevant information has either not been provided to the special correspondent or has been held back by the author thus producing a totally misleading article. The opinion that “ good money has been sent after bad” is ill founded. The fact is that lot of good money ( approximately, Rs766 million and not Rs2.07 billion) had already been spent on the construction of a sizable portion of the project and more ‘ good money’ was direly needed to bring the project to its completion. If one has some knowledge of the layout of the Motorway system designed by the previous government, one would realise that construction of M-3 ( Pindi-Bhattian-Faisalabad) and eventually M-4 ( Faisalabad-Multan) is absolutely essential for the financial health not only of the two motorways but more importantly of the already constructed Lahore-Islamabad and under construction Islamabad-Peshawar Motorways. With the construction of these two motorways the road users would be provided an alternate shorter link while travelling from south of the country to Islamabad, Peshawar, etc. The completion of these missing links is expected to result in sizable increase in traffic and revenue on these Motorways.

While most of the information collected may be essentially correct, it has been used totally out of context and without understanding its meaning and significance. But projects are conceived to attract private investment for public utility. Such project can not take off if they are not economically viable or do not have the potential to attract capital, in other words if these are not “bankable”. As has been rightly pointed out the original M-3 project was not a “ bankable project” on “stand-alone” basis and needed some additional comforts or concessions to make it “bankable”.

Unfortunately, in this case, some one else’s property was offered as the additional comfort ie Jhang-Shorkot Kabirwala road the property of the government of Punjab. Collection of toll on this road without their consent should not have been offered to the concessionaire. So was the case with the other concession concerning competing routes. As it is, the government of Punjab was never amenable to this proposition and no amount of effort or cajoling could change their stance including the last ditch effort made by the previous Chairman of the NHA. This fact alone was responsible for the failure of the ‘ concession Agreement’ and not the inability of the contractor. Having failed to provide the promised concessions,the NHA did not have much choice but to negotiate an equitable settlement with the concessionaire.

The article projects an impression as if the change from BOT to government project went ahead despite serious objections by the Planning Commission. This is an indication of lack of information on the approval procedure adopted for sanctioning of large projects by the government . To enable the readers to make a fair judgment one would like to briefly explain the procedure.

The National Highways projects of this size are approved by the following forums: a. NHA executive board chaired by the Chairman NHA and comprising Members Planning (P&D)IG Motorway Police, Additional Secretary Finance, Joint Secretary Communications, Senior Chief NTRC, Vice President NESPAK, Member Finance NHA and member Planning NHA, b. Central Development Working Party (CDWP), a federal body chaired by Deputy Chairman Planning Commission and comprising Secretary ( Planning Commission), Member Planning Commission, (P&D Division) and other senior officers/heads from various Federal Ministries and provinces as well as from the AJK. The projects/ schemes beyond Rs200 million are recommended by CDWP for final approval of Ecnec, c. executive committee of the National Economic Council (Ecnec), which is the highest forum in Pakistan for approval of development projects and is headed by Finance Minister. The revived M-3 project has been reviewed and cleared from all above forums( As if the BOT project was approved only by the former Chairman NHA in his personal capacity!!!).

It would be rather hard for any reader to buy the idea that a project having run the gauntlet of all these bodies, would have been approved despite serious objection from Planning Commission. Interestingly, all these three forums have high ranking representative from Planning Commission and the provinces. Other issues raised by the author are addressed as under:

a. A so called ‘ general rule’ has been quoted laying down that a contractor failing to meet his obligations is not considered for award of any more contracts. In the light of some facts explained earlier, it is best left to the reader to judge as to the causes or responsibility for the failure of the BOT/ concession agreement.

b. A figure of Rs2.07 billion has been quoted as expenditure on the BOT contract, This is grossly over stated, the actual amount spent and that too on the actual construction of the road and allied facilities is Rs766 million.

c. This relates to the so-called observations by the planning commission and has been dealt with earlier. All the points raised in this article were discussed thread bare in the three forums referred to earlier and the project was approved by all the three forums after having been satisfied by the replies and the rationale, therefore the observations made in the article stand null and void. One may like to continue living in the past(What an expression!!).

d. The question relating to “ open competition” was raised and thoroughly discussed and it was accepted by all concerned that the present arrangement was a just and equitable settlement for unfulfilled contractual obligations and was necessary to avoid heavy claims and long drawn legal battles. It may also be pertinent to note that the work that had already been executed was vulnerable and was being badly damaged by the vagaries of the weather and had to be protected quickly lest it be a total loss. It would also not be out of place to mention that the proposal in its present shape was hammered out in numerous high level meetings attended by senior officers from ministries of Communications, Finance, Law and Justice. Presentations in this regard were also made to the concerned Ministers before finalization of the contract.

e. A reference has also been made to the objection raised by the government of Punjab on the Toll rates for this project. While this objection could have had relevance in the BOT proposal as it had a direct bearing on the economic viability of the BOT proposal, in the present scenario it is completely out of context.The contractor or the contract under the new arrangement has nothing to do with the tolling arrangement. The toll would become leviable only after the completion of the motorway and would follow the same regime as on M-2.

f. Expenditure incurred during prefinancial close period has been audited and duly verified by independent chartered accountants.

It is expected that the above explanation would remove the doubts created by the article.The NHA will remain open and willing to accept truthful public criticism rather than misstatements and sweeping generalization.

Now here is the verbatim reproduction of the minutes of the meeting held on August 2, 2001: ITEM CD-5: Construction of Pindi Bhattian-Faisalabad Motorway (M-3) (Cost Rs5021.5 million; FEC Nil)

The Chief T&C, Planning and Development Division introducing the project stated that the project sponsored by the Ministry of Communications at a cost of Rs5021.5 million, all in local component envisaged construction of a 53 km long, 4-lane divided controlled access Motorway to connect Faisalabad with Pindi Bhattian at Pindi Bhattian Interchange of Lahore-Islamabad motorway. The proposed Motorway would be a toll facility and according to the Sponsoring Agency, the revenues expected from the tolls would be to the tune of Rs. 208.0 million in the first year of operation increasing at a rate of 6 per cent per annum subsequently. He stated that the sponsors had estimated a reduction of 4 hours in the travel time between Faisalabad and islamabad with the construction of this facility. The traffic on the motorway as a toll facility was estimated at 5000 vehicles per day both ways in 2003 ( the year of completion) and 9257 vehicles per day ( both ways) in 2014. Describing the background of the project, he stated that the project was first conceived in 1996 under the government’s BOT policy framework.

A Letter of Support was issued to a joint venture of seven Pakistani Road Contractors Firm namely M/S PAMIC April 14, 1998 followed by signing of a concession agreement on January 15, 1999. The scope of work initially comprised a 6-lane access controlled motorway which later was reduced to a 4-lane motorway. The original cost of the project ( 6-lane)was Rs. 7290 million including NHA/GoP contribution of Rs2187 million ( 30 per cent) in the form of machinery worth Rs2000 million and Rs187 million in cash. M/s PAMIC’s share at 70 per cent was Rs 5103 million, out of which Rs3572 million had to be arranged by them as loan and Rs1531 million as their equity. M/s PAMIC were allowed to collect tolls from Kabirwala-Shorkot-Jhang-Chiniot-Pindi Bhattian section according to the concession agreement, however, due to the refusal of the government of Punjab to hand over the road for toll collection, the concessionaire could not arrange loans from any source. he stated that during a presentation made to the Finance Minister by NHA on May 23, 2002,a revised proposal of funding and construction of the project was considered. it was decided that the project henceforth would be treated as GoP project and the cost for the 4-lane facility would be reduced from Rs7290 million to Rs4500 million ( including the work done) without escalation. It was also decided that the concession agreement would be replaced by a contract agreement with the same firm whereby all the concessions would be treated as withdrawn .

Consequently, the project was considered by the NHA Board in its meetings held on June 25, 2001 and June 29, 2001, where it was observed that the rates in the revised proposal were on the average 41 per cent higher than the Composite Schedule of Rs2000 (CSR-2000). The Board approved the proposal for construction of M-3 as a government aided project with reduced scope of work to 4-lane at a cost of Rs4500 million and directed as under:

a. A summary be submitted to the Chairman ECNEC for anticipatory approval of the project through Ministry of Communications in order to save time and to start work immediately with a view to protecting the existing works.

b. PC-I be urgently prepared reflecting total cost of the project, the cost of the work already done under the concession agreement and the balance quantity to be executed under the new agreement. Proper verification and audit of expenditure incurred to date be undertaken.

c. The adjustment of work done including interest @ 15% upto 30th June 2001 would be adjusted to the extent of 50 per cent against cost of machinery. Remaining 50 per cent of the amount including the interest thereon will be payable to PAMIC after signing of the contract agreement.

d. The issue relating to acquisition of 4000 acres of land by NHA at PAMIC’s cost ( for which a rebate of Rs250 million was offered by PAMIC) will be deliberated and decided during the CDWP meeting.

The Chief T&C further stated that the project, on which an expenditure of Rs. 2078 million had been incurred, was examined in a very short time and the following points merit consideration:

i. The item rates had no basis & found very high compared to NHA composite schedule rates 2000;ii. Toll rates proposed were very high in comparison to M-2 rates. It was not known whether any toll study for the proposed motorway was ever carried out or not;iii. The proposed motorway was not justified on traffic/need basis as a 4-lane motorway was warranted only when the traffic surpassed a level of 50,000 vehicles per day. The level of traffic projected for M3 did not at all justify or even thinking of a motorway. Furthermore, the traffic counts carried out for M-4 ( Faisalabad-Multan) had been assumed for the proposed motorway, which was not acceptable.

iv) Pavement design was not clear. The basic parameter in the design was the CBR which had been assumed at 20 per cent instead of being properly worked out on the basis of proper soil tests, analysis and studies. There was also a danger of high flood level from River Chenab as well as long stretches of water-logged areas which would need soil stabilization. A proper soil investigation report was needed. v) Details of terms and conditions of the initial concession agreement with the concessionaire, reasons for termination of that agreement and conclusion of new contract agreement with the same bidder/contractor without adopting the course of competitive bidding needed to be provided by the NHA. vi) The work done was subject to audit verification on the basis of which the cost was to be firmed up. The audit verification report was not provided to assess the authenticity of the quantum of the work done and the expenditure made thereof. vii) No details regarding land acquisition, relocation of utilities, establishment charges& item-wise quantities had been provided.

viii) Matter relating to purchase of the industrial estate on behalf of the contractor did not form part of the project and therefore was not to be supported.

ix) The economic rate of return of the project was worked out by the sponsors was 4.8 per cent, and that worked out by the Planning Commission was 2.6 per cent, indicating the non-viability of the project.

The chief of T&C opined that after termination of the concession agreement, NHA should have gone for open competition to get better rates and transparency in the matter. He concluded that the project was a case of perpetual subsidy. it neither qualified on traffic/need basis nor on the basis of its economic /financial viability and therefore could not be recommended for approval. He also added that according to a Chief Executive Directive, the projects with low viability were required to be submitted on a summary by the concerned ministry before their execution.( who is this powerful man who can over rule the directive of the Chief Executive himself?).

The Deputy Chief, Economic Appraisal section, endorsing the views of Chief of T&C, stated that according to his estimated the IRR of the project was 2.6 % and 4.8% estimated by the sponsors. The audit cost analysis of the project indicated that break-even tariff per car unit per kilometre was Rs5.27 as compared to proposed charges of Rs1.0 per kilometre which would involve a subsidy of Rs4.27 per kilometre per car unit. However the economic rate of return of the project would increase to 7.7% if the investment made to date were treated as sunk costs. The project was therefore economically unviable.

The representative of the government of Punjab stated that the toll rates for the proposed motorway had been kept very high as compared to other roads in Punjab compared to Lahore-Islamabad Motorway.

The Chairman, NHA, deliberated in details the various aspects including the background of the project. He stated that the initial idea of floating the project on BOT basis by the previous government was wrong. The concession agreement done with the concessionaire was one-sided and the concessions agreed upon could not materialize. The present government after very careful considerations had reached the present solution of making the project GoP-funded.There was no other choice except to continue the project on the present rates and with the same contractor, as otherwise, the contractor could go into litigation and claim which render a greater price( what price??). He certified that the rates negotiated were final, bare minimum and could not be brought down further. With regard to high toll rates, he stated that comparison of toll rates of the proposed motorway with other road projects was not fair.

The benefits of the project would be maximized when the M-4 would be completed. With regard to the traffic needed to justify a motorway, he pointed out that the busiest inter-city route of Pakistan N-5 had even not reached the traffic figures where the need of motorway was established. He further stated that keeping in view the inadequate design of M-2, which had started showing signs of distress, a proper pavement design with water bound macadam and aggregate base layers had been adopted in the proposed motorway. On a query from the Chair, the Chairman NHA explained that the rates adopted in the BOQ of Lahore-Islamabad Motorway(M-2) were high even in 1992 as compared to the rates adopted in the BOQ of the proposed motorway today. He further stated that initially the full machinery lying beside M-2 was provided to the contractor of M-3, but lately half of the machinery was withdrawn.

On another query he explained that the toll already being received through the existing service roads was deposited with the NHA’s Escrow account, and even after the completion of project the entire toll proceeds from the proposed motorway would be received by the NHAS and not by the contractor. To another query regarding service road, the Chairman NHA informed that no where in the world the service roads were provided as black topped facility.He added that every effort would be made for the optimal utilization of this facility by allowing buses and trucks to ply on it whereby the cost of the facility would be recovered in years time.

The Chairman, CDWP, observed that procurement of land for the industrial estate by the NHA would be a compromise on transparency to which the Chairman NHA categorically stated that NHA would not insist on proposed acquisition of land for the contractor.

Decision: The CDWP was of the opinion that 40 per cent of the project costs has already been incurred and it made no scope not to complete the project.It therefore decided to recommend the project for approval to the Ecnec at a cost of Rs5021.5 million including Rs2078.0 million cost already incurred before the project was stopped last year. The land acquisition for industrial Estate would not be done by the NHA, in order to ensure transparency in the project.

The NHA clarification and the CDWP summary to Ecnec if read together gives one a clear picture of the entire project. it is now up to the reader to make a judgment whether or not it is a case of throwing good money after the bad.