Investors Opportunity: SBP advises banks to avail grant for CNG Bus Project

KARACHI: The State Bank of Pakistan has advised commercial banks that are willing to advance loans under Shaheed Benazir Bhutto CNG Bus Project, to approach SBP Banking Services Corporation for upfront payment of Rs 300,000 grant per bus.According to a Circular (BPRD Circular No. 3) issued by the SBP today, banks are advised to complete their due diligence based on the Concession Agreement signed by Operators/ Investors with the City District Government, Karachi before approaching the SBP-BSC Karachi office for down payment. The Federal Cabinet recently approved a scheme for launching dedicated CNG buses in the major urban cities of Pakistan for efficient environment friendly and as an affordable public transport. The Pilot phase of the scheme would start in Karachi during the current year in collaboration with the Government of Sindh and the City District Government Karachi (CDGK) followed by the other major cities. The Government of Pakistan will contribute a total of Rs 677,181/- as subsidy over 5 years towards the cost of one bus, which comprises Rs 300,000/- as upfront grant as part of down payment, and Rs 377,181/- as mark-up subsidy payable in 5 years (on monthly basis). It has been made mandatory for the operators/investors to ply at least 25 buses for a single route. The total amount, initially subscribed by the Federal Government for this pilot project is Rs 300 million. According to the Circular, banks are advised to immediately inform the SBP-BSC Karachi about the financial closure/deal with the operators/investors enabling them to provide with the requisite amount from the pool of Rs 300 million. This provision of amount once pledged would remain valid for 7 working days only, as this scheme would run till the exhaustion of Rs 300 million, it added.Moreover, banks are advised to approach the SBP-BSC, Karachi office for reimbursement of mark-up subsidy on monthly basis, which is 30 days from the date of the first disbursement. In this regard, the SBP BSC Karachi office, 30 days after the placement of order with the supplier for procurement of buses, will disburse the first monthly installment of mark-up subsidy, says the Circular. Banks are also required to immediately inform the SBPBSC, Karachi office to enable them to stop payment of mark-up subsidy in case where mark-up or principal is overdue by 90 days or more from the due date by the operators/investors. State Bank has also informed banks that the period required to procure buses will be 45 days from the date of the financial closure.It may be pointed out that any operator/investor ready to ply buses on different routes has to sign a concession agreement with the City District Government Karachi (CDGK) through the Karachi Mass Transit Cell (KMTC). The operators/investors may file more than one application (in multiple of 25 buses) in order to operate buses on different routes. staff report