Committee suggests setting up special purpose vehicle

  • ktm-tarai expressway
- Post Report, Kathmandu
The special purpose vehicle could be in the form of a company, a development committee or an authority

Feb 21, 2017-A committee formed to recommend modalities for implementation of Kathmandu-Tarai expressway has suggested that the government form a special purpose vehicle to build the project, which is expected to reduce travel time between the country’s Capital and Nijgad in the south to less than an hour.

The special purpose vehicle, according to the committee headed by National Planning Commission Vice Chairman Min Bahadur Shrestha, could be in the form of a company, a development committee or an authority, a reliable source with knowledge of the matter said.

This recommendation was laid in a report submitted to Prime Minister Pushpa Kamal Dahal on Monday. The Premier will now table the report in the Cabinet, which will choose an appropriate special purpose vehicle to build the 76-km expressway.

The committee has also recommended that the government purchase the detailed report of the expressway project from the Indian consortium that prepared it.

“The government can choose to restart the process of preparing the detailed project report, but it will take at least a year to complete it,” the source said, adding, “This 

delay will increase the cost of project by around 6 to 7 percent per year if inflation is adjusted, and inflict intangible losses emanating from fuel consumption and wear and tear of vehicles operating on existing highways.”

Earlier, the committee members had held a round of informal talk with representatives of the Indian consortium to purchase the detailed project report. During the meeting, the representatives expressed interest to sell the report, but did not quote any price.

“If the consortium seeks reasonable amount, the committee has asked the government to purchase the report,” the source said. 

The government, in March 2015, handed over the task of preparing the detailed project report of the Kathmandu-Tarai expressway to a consortium comprising Infrastructure Leasing and Financial Services (IL&FS) Transportation Networks, IL&FS Engineering and Construction, and Suryavir Infrastructure Construction. 

At the time of its appointment, the consortium had agreed not to recover the cost that had gone into preparing the report, if it was allowed to build the project.

After the report was submitted in June 2015, the late Sushil Koirala-led government had even started making preparations to award the project to the Indian consortium. 

But questions were raised over the intention of the Koirala-led government after it decided to provide an annual minimum revenue guarantee of $150 million to the project developer. This meant if the traffic was low on the proposed toll-way and annual earnings stood at, say, $50 million, the government would extend remaining $100 million to the developer every year in compensation.

At that time the government had also started exploring the possibility of getting a fresh soft credit line of up to $750 million from India and extend it to the Indian consortium at lower interest rate to support the project’s construction.

These facilities raised eyebrows and the issue reached the Supreme Court, which issued an interim order, bringing the process of handing over the project to the Indian consortium to a complete halt.

As this process became controversial, the government, in December, scrapped all the agreements reached with the Indian consortium and took a formal decision to build the project on its own.

Published: 21-02-2017 09:17

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