KARACHI: The State Bank of Pakistan would provide loans under Shaheed Benazir Bhutto CNG Bus Project for which the government has approved Rs300 million.

The State Bank on Thursday advised commercial banks, which are willing to advance loans under Shaheed Benazir Bhutto CNG Bus Project, to approach SBP Banking Services Corporation for upfront payment of Rs300,000 grant per bus.

According to a SBP circular, banks were advised to complete their due-diligence based on the concession agreement signed by operators or investors with the City District Government, Karachi before approaching the SBP-BSC Karachi office for down payment.

According to the circular, any operator or investor ready to ply buses on different green routes has to sign a concession agreement with City District Government Karachi through Karachi Mass Transit Cell (KMTC).

The operators or investors may file more than one application (in multiple of 25 buses) desirous to operate buses on different routes.

The Federal Cabinet recently approved a scheme for launching dedicated CNG buses in 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 City District Government Karachi (CDGK) followed by other major cities.

The Government of Pakistan will contribute a total of Rs677,181 as subsidy over five years towards the cost of one bus, which will comprise Rs300,000 as upfront grant as part of down payment and Rs377,181 as mark-up subsidy payable in 5 years (on monthly basis). It has been made mandatory for the operators or investors to ply at least 25 buses for a single route. According to the circular, banks were advised to immediately inform SBP, BSC Karachi about the financial closure or deal with the operators or investors enabling them to provide for the requisite amount from the pool of Rs300 million.

“This provision of amount, once pledged shall remain valid for seven working days only as this scheme would run till the exhaustion of Rs300 million,” said the SBP circular.

Banks are also advised to approach SBPBSC, Karachi office for reimbursement of mark-up subsidy on monthly basis, calculating 30 days, from the date of first disbursement.

In this regard, the first monthly installment of mark-up subsidy will be disbursed by SBP BSC Karachi office, 30 days after the placement of order with the supplier for procurement of buses.

“Banks are also required to immediately inform 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,” said the circular.

The State Bank has also informed banks that the period required to procure buses would be 45 days from the date of financial closure.