Parliamentary panel recommends slew of corrections in concession agreement

Kathmandu-Tarai/Madhes Fast Track Project

KATHMANDU, Oct 2: A sub-committee formed by parliamentary Finance Committee has said the minimum revenue guarantee, project cost, concession period, and toll fee for the development of Kathmandu Tarai Madesh Fast Track proposed by the Ministry of Physical Infrastructure and Transport (MoPIT) cannot be accepted.

The sub-committee led by lawmaker Keshav Badal submitted a study report on technical, financial and physical aspects of the mega project to the Finance Committee on Thursday. Stating that the estimated traffic flow mentioned in concession agreement document is far higher than the reality, the sub-committee suggested that it won't be appropriate to sign agreement for minimum revenue guarantee.

An Indian consortium, including IL & FS, has proposed minimum revenue guarantee of US $ 150 million per year for the concession period of 25 years. It has proposed that the gap between collected revenue and the minimum revenue guarantee has to be borne by the government.

Stating that the proposed project cost of $1.12 billion is not realistic, the sub-committee has suggested conducting a serious review of the project cost. The sub-committee also said that the project at present should not be higher than $970 million as per the study of 2008.

The report also says the proposed project concession period of 25 years after construction period of five years should also be reviewed. Concluding that the proposed toll fee is high, the sub-committee has suggested reviewing the fee in such a way that general consumers will be attracted to use the road.

MoPIT has proposed toll fee for bikes, car, bus and trucks, and heavy trucks at Rs 779, Rs 1,558, Rs 3,116, Rs 4,474, respectively.

Ignoring concerns raised by finance and law ministries, Minister for Physical Infrastructure and Transport Bimalendra Nidhi had tabled the 300-page concession agreement document and plan to award the project in the cabinet last week.

Among others, the finance ministry had suggested to hire an international consultant for negotiation as Nepal doesn't have experience of implementing projects of this scale. It had also said the issue of providing soft loan to the developer should be decided by the cabinet. Similarly, the law ministry had said the act of providing soft loan and paying MRG would be illegal. It had also pointed out the proposal of providing soft loan of $750 million to developer was not included in the bid document.

The sub-committee has suggested renaming the project as ''Kathmandu-Nijgadh Fast Track Project'. It has also suggested to the government to develop the project as well as the second international airport project in Nijgadh as a packaging by going for open international bidding.