Ministry mulls annuity model

- POST REPORT, Kathmandu

May 13, 2014-

Amid a turf war between the Investment Board Nepal (IBN) and the Ministry of Physical Infrastructure and Transport (MoPIT) over who has jurisdiction over the Kathmandu-Tarai Fast Track Project, the latter is now planning to develop the express highway under an annuity model.

Under the model, a developer is awarded the contract to build the project with the cost being paid to the developer on instalment basis by the government after it is completed.

The ministry’s move comes eighth months after potential bidders abandoned the project, whose cost is estimated at Rs 100 billion. Three Indian firms—Reliance Infrastructure, Infrastructure Leasing & Financial Services (IL&FS) and Larsen and Turbo (L&T) were shortlisted to take part in the request for proposal (RFP), but they failed to submit a proposal.

The ministry was encouraged by the willingness expressed by one of the foreign firms that had earlier shown interest in the Fast Track to develop it under the annuity model. One of India’s leading infrastructure development companies, IL&FS, has approached the ministry to develop the project.

According to MoPIT Secretary Tulsi Prasad Sitaula, his ministry has asked for the Finance Ministry’s approval to build the express highway under the annuity model. “We sought the Finance Ministry’s approval as we found the IL&FS proposal convincing,” said Sitaula.

The Finance Ministry says it is studying the MoPIT proposal. As mega projects are usually awarded through a free competition, the Finance Ministry is studying whether the project should be awarded to the interested firm through negotiation. “That’s why we are still holding discussions on the proposal,” said Baikuntha Aryal, chief of the ministry’s budget division.

A vice-chairman of IL&FS is scheduled to visit Nepal next week to discuss the proposal with Nepali officials and ministries concerned.

The Fast Track  also compliments the planned Second International Airport (SIA) in Nijgadh. A report has shown the airport is not feasible without the Fast Track road.

Although the government has kept all the options open, including building the road on its own r with support from donors, Sitaula said his ministry’s priority is still the private sector investment.

Two more companies—one each from China and India—have submitted “brief” proposals, stating they would bring loans from international financial institutions to build the project.

Published: 14-05-2014 08:56

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