Government scraps Melamchi contract of Italian builder

  • It will take at least a year to rope in a new contractor and resume works: Officials

Jan 21, 2019-

The government has decided to scrap the contract with the Melamchi Water Supply Project’s Italian builder in a move which will push the national pride project into further uncertainty.

“The government formally dispatched a letter of termination to the Italian contractor Cooperativa Muratori e Cementisti di Ravenna after it failed to come up with any concrete decision regarding resuming works,” Surya Raj Kadel, executive director of the Melamchi Water Supply Development Board, told the Post. “We have decided to terminate the contract with the existing builder after it did not turn up to resume works even a month after abandoning the project.”

In its previous letter sent last Tuesday, the government had set a Friday deadline for the CMC to make it clear whether it was interested to resume works and how it would want to resolve the dispute.

According to Kadel, the Italian builder did respond but sought at least one more week. “We received a meaningless correspondence which had not even come from the proper channel… and it just sought more time. We cannot do that anymore,” Kadel added. CMC officials on their part told the Post that the Nepal government gave them “a very short deadline”.

“For a meeting set for January 18, the employer [Nepal government] had sent us a message on the night of January 15. The company had responded saying it was not possible to meet within three days’ time,” a CMC official said. “We had said a meeting was possible at a suitable time-around January 27 or so and we had also sought diplomatic assurances.”

Police on the night of December 16 had apprehended Italian staffers of the contracting company, accusing them of abandoning the project and trying to flee the country.

Read: Officials and Italian contractor have differing stories on Melamchi dispute and travel ban

But now, after dispatching a letter of termination of contract, government officials have accused the CMC of “trying to buy more time so that they can come up with more excuses”. The contract with the CMC ends on February 10.  

“They are dragging this matter further close to the project deadline to create confusion over contract termination, as two weeks’ gap is required between the deadline and the decision to terminate the contract,” said Kadel.

The government and the CMC now are squabbling over who actually terminated the contract.

The CMC official told the Post that the government cannot terminate the project which it had already scrapped after the government failed to pay the dues. “Melamchi project remains terminated by the CMC. The employer [Nepal government] cannot terminate something which is not in place,” the CMC official said.

The Italian contractor had first submitted the project termination letter to the government in the third week of December, saying the government had failed to pay Rs350 million that it owed to the builder as per a decision by the Dispute Adjudication Board (DAB).

But in an interesting turn of events, the CMC had withdrawn the termination letter after its staffers were allowed to leave the country. They had subsequently flown out of the country. Later, the CMC said its decision to withdraw the termination later was null and void and that it would continue with its decision to terminate the project.

“After returning to their country, they told us that they had withdrawn their project termination letter under coercion and influence. We had never accepted their letter of termination,” Kadel claimed.

Since then the CMC has maintained that as the Nepal government had not paid the amount decided by the DAB within the deadline, they reserved the right of terminating the project. But government officials have refuted the CMC claim.

“They did not have enough ground for terminating the project. First, we had rejected their project termination letter. Second, the DAB cannot dictate a deadline for payment,” Kadel told the Post, adding that the government had also registered its dissatisfaction with the DAB regarding the additional amount. Before flying out of Nepal for Christmas and New Year celebrations, the CMC staffers had committed that they would return to resume works and find an amicable solution through dialogue.

Later, the company sent a list of pre-conditions for resuming works, including holding a meeting, which the government had rejected.

The government had sent an email asking whether the company would work on the project or not.

What the project scrapping means?

The Melamchi Water Supply Project, which has been mired in controversies and delays for years, is once again in a state of limbo.

The project was near completion before the fresh controversy hit the project in December.

“Now it’s up to the government and the donor,” said Kadel. “A regular process to hire a new contractor would mean the project will be pushed at least a year further. “First of all, there should be a global tender which requires at least 45 days of notice. Then following the guidelines of the Asian Development Bank, the donor, would require at least eight-nine months,” Kadel said.

According to him, the ADB needs to seek consent from its headquarters for any project above Rs1 billion and then more time will be required for correspondence, selection and evaluation of the contractor.

“The government and the ADB should hold close consultation and find a way out as per the existing laws,” Kadel added.

Less than 5 percent of work remains on the project which will divert 170 million litres of water every day to Kathmandu from the Melamchi river in Sindhupalchok.

Published: 21-01-2019 07:39

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