Kathmandu, August 11

The government will soon hold fresh negotiations with the Indian bidder with a target to reduce the cost of the Kathmandu-Tarai Fast Track road. The project implementing authority — Ministry of Physical Infrastructure and Transport (MoPIT) — is preparing for the negotiation.

Giving its feedback on the expressway project implementation, National Planning Commission (NPC) had recently directed MoPIT to further negotiate to bring down the cost of the project. The bidder — a consortium of Infrastructure Leasing and Financial Services (IL&FS) Transportation Networks, IL&FS Engineering and Construction, and Suryavir Infrastructure Construction — had agreed to undertake the project at a total cost of $1,297 million.

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The cost is based on the financial proposal of the bidder and negotiations held last month. It includes $1,117 million (including VAT) required for construction. It means the bidder has underlined the need for $180 million for non-construction related expenses. MoPIT officials said that, as recommended by NPC, they would negotiate with the bidder to bring down the project cost.

“We will see if there is a chance to reduce the project cost in components like dividends to be provided in equity,” said Satyandra Shakya, project chief of the Fast Track road. He added that the non-construction cost of the project includes expenses for insurance, office establishment and interest during construction, among others.

A team under the coordination of MoPIT Joint Secretary Bishnu Om Bade Shrestha will hold negotiations with the IL&FS consortium. If the negotiations conclude successfully, MoPIT plans to send a proposal to the Cabinet seeking approval to handover the project to the bidder. Work on preparing the terms of condition of the concession agreement, the final agreement to be signed with the developer, is also underway.

In a bid to complete the construction of the project within the scheduled five years, strict conditions like penalty of Rs 10 million per day for up to 270 days on the developer after exceeding the five-year period, and cancellation of agreement after 270 days are being included, according to Shakya. There will also be a fine provision, in case the developer manipulates traffic calculation of the Fast Track road.

In recent times, the project has also run into controversy regarding the government’s preparation to select the bidder to carry out the project. It faced criticism after MoPIT and the Ministry of Finance showed readiness to provide around Rs 75 billion loan to the bidder from the line of credit provided by India to Nepal.