Ready to resume work, Melamchi builder takes back termination letter

  • Breakthrough in negotiations between Italian and Nepali officials comes after intervention by the Italian Embassy in New Delhi

Dec 25, 2018-

The ongoing dispute in the Melamchi Water Supply Project has been temporarily settled after the Italian contractor withdrew the termination letter it had submitted to the government saying it would no longer work on the project.

A high-level official with Cooperativa Muratori e Cementisti di Ravenna (CMC) confirmed to the Post that they had revoked the termination letter and also expressed their commitment to work again with the government after the Christmas holidays, provided their terms are addressed.

“Just because we have withdrawn our termination document does not mean we have let go on what the government owes us,” the Italian official said. “We want timely payment going forward.”

The latest breakthrough in the dispute was possible after the Italian Embassy in New Delhi, which also oversees affairs for Nepal, intervened and raised concerns regarding the government’s decision to restrict its citizens from leaving the country.

A senior official at the Nepali Embassy in New Delhi told the Post that the Italian Embassy wrote to the Ministry of Foreign Affairs and warned that Nepal government’s move may lead to “diplomatic tension between the two countries.”

Relations between the government and the CMC had soured after the contractor submitted the termination letter, following which many of its staffers were apprehended in Kathmandu and their passports held by Nepali officials, barring them from leaving the country.

Following the Italian Embassy’s communication, the Foreign Ministry in Kathmandu wrote back to Italian officials requesting more details about the financial status of the CMC, which has been reported to be teetering on the brink of bankruptcy, an official at the New Delhi embassy told the Post.

After the intervention, at least 18 CMC staffers, many of whom are Italian, have returned to their home country to celebrate Christmas with their families.

In an interview with the Post, Shankar Prasad Subedi, spokesperson for the Water Supply Ministry, said that after the CMC withdrew its termination letter, the government has revoked the travel ban on all its employees.

“We hope they will resume their work in the new year,” Subedi said.

But Nepali officials maintain their stance that their action was necessary because the Italians were trying to flee the country without completing the project.

“We would have given them the money, but we didn’t because the company had declared bankruptcy,” said Gajendra Kumar Thakur, secretary at the Water Supply Ministry.


Thakur said that the government still had time to pay Rs362 million that it owed the Italian contractor, as recommended by the Dispute Adjudication Board in October. 

“We had more time to revisit and challenge the decision,” Thakur said.

The senior CMC official who spoke to the Post, 

however, denied Thakur’s accusations and said they neither intended to flee nor had the company declared bankruptcy.

“Our company has not gone bankrupt, which is a claim frequently used by Nepali government officials to support their arguments and show us in a bad light,” the Italian official said. “The company’s bonds had been downgraded and declassified, but the company has not gone bankrupt.”

The CMC, which is the fourth largest construction company in Italy by revenue, was downgraded to B3 from B2 and its probability of default rating to B3-PD from B2-PD by the Moody’s Investors Service in September. The company’s outlook on all ratings was also changed from stable to negative.

The Italian official said that despite its financial status, the company still runs projects across the world and intends to finish the work it began in Nepal five years ago. 

“We came here to do good business, not to cheat and flee,” the CMC official said. “But rather than paying for our services, Nepal’s government seized our bank deposits. We hope it can create a nicer environment for us to continue the rest of our work here.”

However, the official said many of his colleagues continue to be traumatised after the Nepali side’s treatment of them last week.

“Just imagine,” the Italian official said. “Who would want to come back to work with their family and children after going through so much stress and embarrassment in a foreign country?”

Published: 25-12-2018 06:54

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