Indian firm seeks Rs3b for expressway DPR

- BIBEK SUBEDI, Kathmandu

May 8, 2018-

Indian firm Infrastructure Leasing and Financial Services (IL&FS) has presented a bill totalling Rs3.17 billion for preparing a detailed project report (DPR) for the Kathmandu-Tarai Expressway in 2015.

On Sunday, the Indian consultant applied to the Ministry of Physical Infrastructure and Transport seeking payment for the costs incurred as the Nepal Army, the project developer, has refused to purchase the DPR. The amount includes interest and the opportunity cost.

The Indian company’s move has left the ministry pondering its next move. “We have just received the letter from the Indian company, and we are yet to decide our next move,” said Joint Secretary Ram Hari Pokhrel. “We have to go through the memorandum of understanding (MoU) signed with the Indian company first and make preparations for possible arbitration.”

Several transaction lawyers whom the Post approached were not sure if the Nepal government was liable to make payment. They said that the arbitral tribunal would have to decide whether the MoU requires the government to reimburse IL&FS for the expenses.

“The MoU states quite explicitly that the project will only be awarded if the concession agreement negotiations are concluded successfully,” said the lawyer privy to the issue.

The Indian consortium, which was also expected to construct the 76-km expressway connecting Kathmandu with the southern plains, prepared the report and submitted it to the ministry in July 2015.

At that time, when the Sushil Koirala-led government was preparing to award the project to the Indian consortium, questions were raised after it decided to provide an annual minimum revenue guarantee of Rs15 billion if the road toll failed to generate adequate profits.

The controversy prompted the government to scrap all the agreements reached with the Indian firm and decide to construct it with domestic resources. Latter, on May 4, 2017, the government formally handed over the project’s responsibility to the army with the authority to purchase the DPR from the Indian company.

However, the army decided against purchasing the DPR saying that it was incomplete, and that a new one needed to be prepared. The army has since initiated a public procurement process to appoint a consultant to prepare a fresh DPR. This led the Indian company to go for arbitration to recover the expenses incurred during the preparation of the report.

Published: 08-05-2018 08:39

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