Infrastructure Leasing & Financial Services (IL & FS) is the developer selected for the 76-km Fast Track road that connects the capital city with the tarai.Two-way road toll for a car will be about Rs 3,116 and the fuel cost will be about Rs 1,700 (calculated for a mileage of 12 km per liter), making for a combined cost of Rs 4,900. By contrast, two-way airfare will be only Rs 5,300 at today's rate. The car maintenance cost has not been factored in.
Birendra Bahadur Basnet, Managing Director of Buddha Air, claims that airfares will not rise in the next five years but may even come down once larger planes are brought into service.
"The fare will be cheaper if the government keeps down the profit margin for Aviation Turbine Fuel (ATF) to single digit," said Basnet. Currently, the profit margin on ATF is Rs 43 per liter. Basnet says movement and travel will be redefined once Bhairahawa and Pokhara regional airports come into operation following upgradations.
Saroj Kasaju, chairman of Board of Airlines Representatives of Nepal (BARN), also echoes Basnet. There would be little or no difference in the cost of travel between these two points by plane and by Fast Track if the road toll rates remain high, he said.
Likewise, the toll rates for motorcycles, buses and trucks are Rs 800, Rs 3,116 and Rs 4,674 respectively and the Detailed Project Report of the Fast Track, which cosntains these rates, has already been approved by MoPIT while the proposal on awarding the project to the Indian developer is under discussion at the National Planning Commission. The toll rate won't be revised at least for the first five years.
Ranjan Kumar Dahal, an engineering geologist and assistant professor at Tribhuwan University, said that the toll rate is one of the highest in the world. The toll rates are being devised against the scenario of very low vehicular movement and most Nepalis not owning cars, which are taken as a luxury and taxed up to 250 percent, added Dahal.
Engineers also say that the toll rate is high given the present context of having to travel the long route via Prithvi Highway to Narayangadh and then to Nijgadh. The fast track will connected with the proposed Second International Airport (SIA) in Bara, which should provide sizable traffic for the toll road. But the issue of developing SIA is not under discussion and no progress has been made in that direction.
Officiating Secretary at MoPIT, Devendra Karki, said that negotiations with developers are ongoing and right now the issue is one of providing minimum revenue guarantee (MRG) for the developer. "The developer has asked for Rs 15.50 billion MRG per year to develop the road and the tolls are not the major issue in negotiations. However, there is room for revision of the tolls," added Karki. He also argued that the toll road will hold its own against the air route as one will not have to go through airport hassles and put up with the uncertainty of flights. Negotiations are ongoing on how reduce the MRG, he added.
In negotiations for changing the tender document conditions under which the developer makes the investment and collects toll revenue, the government has proposed a cheap loan of Rs 75 billion to the developer from the Indian Line of Credit, on top of the government's commitment of equity support of Rs 15 billion.
The estimated project cost for the toll road is Rs 120 billion, including Value Added Tax, and it will be developed strictly within five years without any delay and cost overruns. Developers will be fined Rs 10 million for every day of delay after the deadline.
Developers will complete the project and operate it for 24 years and any gain above the MRG will be shared in the ratio of 20 and 80 percent between the developer and the Government of Nepal respectively.
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