Kathmandu, July 1
An Indian consultant has submitted the detailed project report (DPR) of the Kathmandu-Tarai Fast Track road to the government before the deadline. The Ministry of Physical Infrastructure and Transport (MoPIT) plans to complete evaluation of the report within a week and decide whether it is applicable or not.
A 10-member evaluation team under the coordination of Hari Om Srivastav, former joint secretary of the government is underway. The consultant — a consortium of Infrastructure Leasing and Financial Services (IL&FS) Transportation Networks, IL&FS Engineering and Construction, and Suryavir Infrastructure Construction — had submitted the detailed study report last week.
MoPIT said that besides the DPR, the consortium has also presented a fresh financial proposal to undertake the project revising the minimum revenue guarantee (MRG) it sought earlier. Being the lowest bidder for the project in the tender called last year, the consortium had quoted Rs 317 billion as MRG from the road in a period of 25 years of operation under the build, own, operate and transfer modality.
“Evaluation of DPR is expected to be completed within a week and we will negotiate on financial issues for signing concession agreement, only if the DPR gets a go-ahead,” said Tulasi Prasad Sitaula, secretary of MoPIT. He said that the IL&FS consortium had said they had quoted higher MRG earlier based on higher interest rate facility available in India.
As per the detailed report, the total cost for construction cost of the Fast Track road would not exceed Rs 100 billion. Sitaula said experts were evaluating the different aspects of the DPR based on their expertise. The evaluation committee includes Prof PC Jha, Saroj Bhattarai, Subash Dhungel, Advocate Ankit Dhakal, Chartered Accountant Parameshwor Mahaseth, Hari Prasad Dhakal and Bhoj Bahadur Dahal as experts from related sectors.
With the consortium seeking such a high MRG to develop the project and no clear idea on the financing cost of the project, MoPIT had decided to go for DPR study first. On March 16, MoPIT had signed the agreement for DPR preparation within four months. As per Sitaula, taking into account the issue of high interest rate in India highlighted by the bidder, they have also started discussions to look for alternative ways to gather resources within the country too through bank loans and issuance of bond in local markets, among others.
Both the bidders — IL&FS consortium and Oriental Engineers Structures — that had submitted request for proposal for the project last year had asked the government to allow them to collect at least 30 per cent of investment required from the local market. As the MRG of the proposed expressway was criticised for being too high, Mukunda Gajanan Sapre, executive director of IL&FS Transportation Networks, while signing the DPR agreement had also said that they would optimise the financing cost of the project before approaching the government for negotiation.
The preparation and development so far indicate that the government is committed to hand over the project to IL&FS consortium rather than exploring other alternatives, like building with its own cost or starting a fresh bidding, a source at MoPIT said. The government has also been receiving pressure from various fronts, including Development Committee of Legislature-Parliament, to build the road with its own resources.
A version of this article appears in print on July 02, 2015 of The Himalayan Times.