According to the technical-economic Study completed under the UNDP/UNIDO Preparatory Assistance Project DPIPAK/89/025 estimates of the annual recurrent costs of the project including maintenance and depreciation are as follows:

Status early 1993; in the meantime the inundated and affected areas considerably increased.

 - 0 & M costs:                 Rs. 13-96 million or US$ 536.923 ( 63.7%)       

 - Depreciation:                 Rs. 7.94 million or US$ 305,384 ( 36.3%)       

       Total:                         Rs. 21.90 million or US$ 842,307 (100.0%)    

The above annual recurrent cost represents less than I% of the sales value and about 2.5 % of the value-added generated by the leather industry in Kasur. Furthermore, the above Technical-Economic Study identifies the treatment system in the project as the only available least cost solution.

The following sharing formula to meet these annual 0 & M and depreciation costs has been agreed upon between Government of Punjab and the Tanneries Association Dtngarh, Kasur which needs to be laid down in a separate legal agreement:

 - Kasur tanners             50% (or Rs. 10.95 million on current estimates)  

 - MCK                         15 % (or Rs. 3.29 )          

 - District Council           15 % (or Rs. 3.29 ' ' . . ) 

 - Government of Punjab 20% (or Rs. 4.38 on account of depreciation only)       

The Finance Department, Government of Punjab, which will open a Depreciation Fund within the Public Account, from which replacement investments would be financed, will keep contributions towards depreciation.

In order to further ensure the project financial viability as the depreciation figures are based on historic costs, the Government of Punjab agrees that the above percentage sharing formula is maintained at variation of 0 & M costs and subject to the adjustment to depreciation. Depreciation costs will be based on periodically (every 2 years) revalued asset value based on replacement costs. For the same reason, the real value of the accumulated Fund balance that is maintained from the outset should earn a return at least equal to the increases in price of the assets for which the fund is ultimately to provide replacement. The Government of Punjab agrees to formalize above arrangements in the legal agreement before the start of the project.

The project is considered priority one in the action plan for the implementation of the National Conservation Strategy. Addressing environmental pollution problems especially identified under the NCS plan is one of the four priority areas in the UNDP and Government 5th Country Programme (1993-1998).

Furthermore, there has been considerable multilateral and bilateral assistance in the leather sector during the past decades. The external assistance has concentrated in the fields of institutional strengthening, training and extension services, improvement of quality and increased productivity, improved leather finishing etc.