Pact in Nepal’s favour: Ministry

  • Kathmandu-Tarai fast track project
- Post Report, Kathmandu

Oct 4, 2015-The Ministry of Physical Infrastructure and Transport has claimed Nepal has got “significant concessions” from the proposed Indian developer of the Kathmandu-Tarai Fast Track project during negotiations, amid criticism over its plan to award the project’s contract to an Indian firm.

The ministry is preparing to award the contract for the 76-km express highway to an Indian consortium of Infrastructure Leasing and Financial Services (IL&FS) Transportation Networks, IL&FS Engineering and Construction, and Suryavir Infrastructure Construction.

As per the revised agreement, the Indian company has to complete the project within five years from the financial closure date. “If it fails to do so, it will be liable to pay Rs10 million every day until 270 days,” said Gajendra Kumar Thakur, secretary at the Physical Infrastructure Ministry. “If the developer fails to complete the project within the 270 days, the government can terminate the contract and confiscate the performance security.”

The two sides have also agreed to give the government senior lender’s rights given a large chunk of funding (Rs75 billion) is being made by the government in the form of loan. The rights mean the government will get the first priority to receive payments in the event the company goes bankrupt. The government plans to provide the loan to the developer at 3 percent interest rate, while the developer will arrange Rs37.5 billion, including Rs20 billion equity.

Given the most controversial part of the agreement being the minimum revenue guarantee (MRG) offered by the government (Rs15 billion a year) officials at the ministry claimed the MRG does not mean the entire guaranteed amount should be paid to the developer. “The amount is to be paid only if there is zero traffic, and there is no possibility for such a situation,” said Minister for Physical Infrastructure and Transport Bimalendra Nidhi.

The ministry officials claimed the government would have to pay a maximum of Rs15.2 billion to the developer over six years if the traffic flow remained as estimated and the second international airport is built in Nijgadh, Bara, which is expected to complete in the next 10 years.

The ministry has estimated 10,715 passenger car unit (PCU) in the first year of operation, and if the actual traffic is in line with or exceeds the estimate, the government will have to pay Rs7.5 billion for that year.

As per the revised agreement, the developer will ensure 99 percent toll collection efficiency. “If the developer is found cheating in the number of vehicles, it can be slapped a fine of up to 180 times of the cheated amount,” said Thakur.

The Physical Infrastructure Ministry has been given the authority to instruct the developer on toll fee as per the revised agreement.

With another concern being the “Force Majeure” provision, the ministry officials said the government would not be responsible for paying compensation to the developer in the event of natural disasters like landslide, earthquake and epidemic, but during bandas and strikes.

If vehicles do not ply on the road due to banda for 48 continuous hours, the government will be subject to pay the compensation, they said. “After certain losses are compensated by the insurance company in line with the policy amount, the remaining losses will be borne by the government and the developer equally,” said Thakur.

Published: 04-10-2015 08:35

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