LAHORE: The Lahore Orange Line project, completed four years ago, still has outstanding liabilities due to the Punjab Masstransit Authority (PMA) and Lahore Development Authority (LDA) failing to set aside funds. Moreover, Rs10 billion in revolving funds, authorized by the Supreme Court to cover project liabilities and Rs2 billion in retention money, has gone missing. These funds were deducted at 5% of total bills approved through interim payment certificates (IPCs), but their whereabouts remain unknown, according to Dawn’s investigation.

A senior official from a construction firm said that despite completing the project after significant delays and financial losses due to court interventions, the PMA and LDA still owe them payments for work done and retention money, four years later. ‘Besides our own dues, other firms’ payments are also pending,’ he said.

According to letters sent to the Punjab government and LDA, the mismanagement of funds designated for completed civil works and retention money has led to the withholding of legitimate payments, further complicating the issue.

“Upon conclusion of the arbitration proceedings, the awards were announced for retention money on Sept 30, 2022, and for certified work done on Dec 23, 2022, and Jan 16, 2023, in our favour. However, despite the awards being made rule of the court by the civil court, payments for Lahore Orange Line Package-1 are still pending as the funds are either missing, untraceable, or have been unlawfully transferred to anonymous accounts/heads,” says a firm in a letter.

Documents reveal that over Rs1.07 billion in retention money deducted from Orange Line Package-1 bills/IPCs is unaccounted for, with its current whereabouts unknown. It appears that LDA transferred this amount to PMA in 2018, as shown in government vouchers for IPC-1 to IPC-27. These vouchers indicate that deductions were made for retention money and withholding income tax, totaling Rs1.070 billion and Rs1.745 billion, respectively, by IPC-27.

The income tax sum was remitted to FBR by LDA in accordance with relevant laws and regulations. However, the retention money amount remains unaccounted for. Pursuant to the Punjab and federal financial rules, the retention money, which is an amount retained out of the approved work done, belongs to the contractors and cannot be utilised for any other purpose. However, on the request of the contractors, it can be deposited in an interest-bearing account to mitigate devaluation risks. LDA has consistently maintained sufficient funds in view of the aforesaid heads of account; even surplus funds were available until the year 2021.

In 2016/17, according to the letter, the government of Punjab allocated Rs10 billion to LDA as a revolving fund for the Orange Line project. In fact, as per revised PC-1, the loan amount from EXIM Bank (China) was $563 million and beyond this amount (Rs10.612 billion) was to be provided by the government of Punjab, which the government provided in the shape of a revolving fund.

In April 2019, the Supreme Court ordered the reauthorisation of these funds for clearing the remaining payments for civil works in accordance with the revised project design. The para 5 of the apex court orders of April 19, 2019, states that “It also appears that vide order dated August 30, 2018, this court had directed that the amount of Rs10 billion already available with LDA be reauthorised to cover the cost overruns of civil work of the project. We have been informed that the reauthorisation has since been granted and there is no impediment in the use of the said funds by LDA to cover the cost overruns.” However, in 2021, these funds were reallocated with PMA’s approval and are currently unavailable or untraceable to settle the outstanding liabilities for civil works.

“The PMA general manager in 2023 reportedly advised the LDA chief engineer to submit the request to initiate the withdrawal of retention money from the China EXIM Bank. The Nespak-CEC (Joint Venture) team prepared an IPC using the current exchange rate and completed all necessary documentation for the drawdown process, but to no avail. And these funds are not currently available or traceable for the retention money related to civil works,” explains the letter.

On the other hand, both LDA and PMA have different views on retention money.

“The revolving funds amounting to Rs10 billion had been utilised by the Punjab government for launching and completing various city projects in Lahore. The retention money deducted was not claimed by LDA from PMA at that time as it was to be obtained at a later stage. The LDA didn’t claim this, fearing that the government would have to pay interest on this for being a Chinese loan,” an LDA official, requesting anonymity, explained. When asked why the LDA continued deducting from the bills through government vouchers that proved the availability of funds with LDA, the officer couldn’t answer satisfactorily.

The LDA chief engineer was not available for comment. PMA General Manager (Operations) Uzair Shah confirmed that the Rs10 billion Orange Line revolving funds were used by the government with a commitment to return whenever required. However, the funds (retention money) had not been billed to Exim Bank at that time. “The Rs10 billion revolving funds are not available now. But $159 million in the wake of the Chinese loan have been surrendered by the provincial development working party,” Mr Shah said, adding that the liabilities related to retention money, etc., would be cleared through these funds after approval by the economic affairs division. When asked how the retention money could be deducted while there were no funds, he continued insisting that LDA sent PMA the net bills alone (without retention money). “Look, the Chinese loan period expired in 2023. But we will have a separate arrangement to clear such liabilities,” he added.

Published in Dawn, June 24th, 2024