PSDP: costly and ineffective!

As per data released by the Planning Commission, between July 1 and December 16, 2011, total federal PSDP (Public Sector Development Programme) disbursements stood at Rs78.4 billion (exclusive of foreign aid) against the Rs290 billion earmarked for FY12. Within this, Rs33 billion are budgeted to be spent by the cabinet and finance divisions for "Special Programmes", and Rs36.5 billion would be provided by foreign donors and aid. The details of releases up till December 16 reveal that some divisions and areas received their PSDP funds in blocks, which means that the recipients utilise the funds as per their own priorities. Block releases worth Rs13.4 billion were made to the communications division/NHA, Rs8.926 billion to the HEC, Rs 3.239 billion to FATA, Rs2.788 billion to AJK, and Rs2.065 billion to Gilgit-Baltistan Major releases included Rs3.6 billion for Diamer-Basha dam (total cost: Rs60 billion); Rs3 billion against the raising of Mangla dam (total cost: Rs62.553 billion); Rs1.495 billion for Pakistan communication satellite system (total cost: Rs17.954 billion); Rs633.5 million for phase-C2 (total cost: Rs51 billion) and Rs4.576 billion for phases C3 & C4 (total cost: Rs189.9 billion) of Chashma nuclear power project. Other large disbursals included Rs790.3 million for 530 railway wagons (total cost: Rs4 billion); and Rs3.192 billion for family planning & health care (total cost: Rs17.6 billion). The trend indicates that those projects which are nearing completion are being given priority. Interestingly, the finance division is involved in disbursing funds and monitoring progress for community-level projects for drainage and sewerage systems, water & sanitation, healthcare, etc. During the period, over Rs800 million were disbursed for these schemes in areas like Hyderabad, Benazirabad, Badin, Lyari, Multan and other Southern Punjab districts. The total cost of such schemes exceeds Rs20 billion. After the passage of nearly six-months, the federal government could release just under a third of PSDP funds budgeted for FY12 from its own sources. The throw-forward of 1,271 ongoing projects is just under Rs3 trillion. Even an annual PSDP utilisation of Rs300 billion a year would take ten years to finish the current project portfolio. It is clear that such a status quo is not sustainable. Infrastructure projects, largely brick and mortar, require huge capital injections, and have long completion periods. Their lower rates of returns fail to entice the private sector, but often get approved by the government on political and social grounds. Some rationalisation measures were suggested in the "Analytical Review of the PSDP portfolio" to the Planning Commission in March 2011. These included: re-estimating costs and benefits of existing projects, reviewing projects for deferment, putting embargoes on new projects except where there is critical need and donors commitment involved, and using public-private partnership (PPP), built to operate & transfer (BOT), and built to operate & own (BOO) to reduce the throw forward. The government conveniently slashes down PSDP whenever the fiscal crunch becomes unbearable, and this year might not be any different. This affects the viability of ongoing projects through time and cost overruns, and effectively delays the impacts and benefits of development. No wonder the completion time of a PSDP project averages 17 years!

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Federal PSDP FY12 (Rs bn)
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Sector             Ongoing    Throw Forward      FY12 budgetary             FY12
               Projects (nos)    (Cost)           allocations          Releases*
                                              (Rupee)    (Foreign Aid)
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Infrastructure        333        2,225          126.2           31.2        40.9
Social                855        585.3            124            5.3        36.8
Others                 83         41.3            3.3              0         0.7
Total (PSDP)        1,271      2,851.6          253.5           36.5        78.4
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* July 1 to December 16, 2011 Source: Planning Commission