Nepal | October 28, 2020

EDITORIAL: PPP model projects

The Himalayan Times
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Once the PPP policy is enacted into law the private sector is expected to make investments on those projects to be identified and prioritised by the government

The government has introduced the much-talked about Public Private Partnership (PPP) policy which will pave the way for the creation of a viability gap fund and project preparation facilitation fund in order to assist the project developers. The viability gap fund is a kind of fund backed by the government in case any project faces financial crunch during the construction of such projects. The policy envisages preparing guidelines for the operation of viability gap fund and project preparation facilitation fund within a year. For this, the government has to clear hurdles for the procurement, project evaluation and its approval within a year of the proposal from the private developers. The PPP model which will replace the existing BOOT (Build, Own, Operate and Transfer) Act will be applied mainly on the construction of highways, bridges, hydropower projects and transmission lines. The government will identify those projects to be built under the PPP model in which the private sector will make its investment and such projects are required to be handed over to the government after operating them for a certain period of time in a good condition. A project worth Rs. one billion should be initiated through a global bidding while others worth Rs. 500 million should get the approval from the PPP Steering Committee.

In order to encourage the private sector to build any projects under the PPP model the policy has envisaged allowing the government to extend tax relief for a certain period. The government will also assist the private sector to arrange financial resources for a longer term. For this, the government will create a revolving fund to acquire land for projects which will later re-compensate the government on royalty or rent basis depending on the nature of project. If any project is built on the PPP model the government will share its risk and benefit with the private sector proportionally. The risk associated with the project, design, management, quality, non-compliance with the environment protection rules and lack of technical know-how will have to be borne by the developers themselves.

The PPP policy however states that the risks emanating from political conditions and other unavoidable circumstances, lack of coordination between the government agencies, lingering process of acquiring land and delay in issuing the licenses for the project or delay in releasing the fund as promised by the government should be borne by the concerned government agencies. It also states that the government agency will have to bear the responsibility of debt servicing in case the government terminates the project mid-way. As the PPP policy was introduced by the cabinet on October 9 after holding extensive discussions with the stakeholders it is expected that the process of the infrastructure development will expedite at a desired level. The private sector had been calling for a law on PPP model so that the private investment can also make its investment on major infrastructures with financial and technical support from the government. Once this policy is enacted into law the private sector is expected to make adequate investments on those projects to be identified and prioritised by the government.

No compromise

The skies of Nepal have proved to be unsafe for air travel with frequent accidents or near misses. Recently a mid-air near collision almost took place between a Nepal Airlines Boeing 757 and a Simrik aircraft above Bharatpur. Had the flight crew not taken evasive action by the on-board collision system, the aircraft could have collided. Nepali aircraft operations requirements have often been flouted which has led to many air disasters in Nepali skies. The TIA possesses a short term conflict alert safety net provided by Japan to avoid head-on collisions but in this case a collision almost occurred about a month ago because the gadget was not working. The improper installation of the device was responsible.

Moreover, there are many complaints about the Air Traffic Controllers not being efficient although they have received training in advanced countries. The ATC supervisor is to be blamed for this near tragedy as he was having a snack and the control tower was unmanned. There also happened to be some misunderstanding as the supervisor could not monitor the air traffic as well as controllers.

A version of this article appears in print on October 19, 2015 of The Himalayan Times.

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