The government’s plan to build an $800 million monorail in Kathmandu has been thrown into doubt after a prospective builder failed to deposit the performance guarantee, forcing Investment Board Nepal (IBN) to cancel signing a memorandum of understanding (MoU) with it to prepare a detailed project report (DPR).

IBN, the implementing agency of the Kathmandu Monorail Project, was scheduled to sign the MoU with Kathmandu Monorail on Wednesday, but the signing was cancelled after the company did not deposit the Rs100 million performance guarantee.

The prospective developer’s failure to deposit the performance guarantee has cast doubts on its ability to execute the $800 million project, IBN said.

On Wednesday, IBN told representatives of Kathmandu Monorail to deposit the funds before signing the MoU, but they said that payment arrangements were being made. IBN then gave Kathmandu Monorail two days to have the deposit ready.

“We clearly stated that they should first deposit Rs100 million as performance guarantee before signing the deal,” said Uttam Bhakta Wagle, spokesperson for IBN. “We have given them a deadline of two days. If they submit Rs100 million by Friday, we will sign the MoU, otherwise we will not negotiate with them.”

Two years ago, the company had submitted a proposal to IBN showing its willingness to build the monorail along the ring road in the Kathmandu Valley. Subsequently, the board sought suggestions from the National Planning Commission (NPC) to reach a decision on the proposal, and a committee was formed under the leadership of a member of the commission.

After evaluating the proposal, the committee submitted its report to IBN which recommended allowing Kathmandu Monorail to prepare a DPR for the project. The panel also urged the board to include a provision in the MoU clearly stating that the government will not bear the cost of the DPR if the project is dropped.

This means that if IBN decides against developing the monorail project, it will not be liable to pay the company for the DPR. Likewise, if the board decides to award the construction project to some other developer, Kathmandu Monorail will receive payment only if the other party agrees to purchase the report.

The board of directors of IBN accepted the recommendations of the committee and started negotiations with the prospective developer. However, the company’s inability to prove its credibility and capacity to develop the monorail has left the plan in limbo.