Things seem to be moving in the positive direction between the Asian Development Bank (ADB), the single largest lender in the $464 million Melamchi drinking water project, and the interim government after Hisila Yami, the Maoist minister for Physical Planning and Works, took a stand against awarding the management contract for the distribution of drinking water in the Kathmandu Valley to Severn Trent, a British company with a controversial reputation in Britain and in a couple of developing countries. The meetings this week between an ADB mission and government representatives and other stakeholders have provided some good signs for the project, as the multilateral donor is reported to have been responsive to Nepal’s reservations about Severn Trent and preference for a new management framework for water distribution in the Valley.

What is most important is that the cooperative relationship between ADB and the government should continue and get wider and deeper. The previous government had agreed to the ADB conditionality in favour of Severn Trent, and Yami’s stand had initially triggered a row in the government, and some Cabinet members and leaders of some parties even predicted a disaster for Nepal’s ties with ADB if the British company was denied the contract. ADB’s response should be taken in the right spirit, and Nepal should learn lessons to make its development partnership with multilateral donors more fruitful, and more to Nepali interests. Undoubtedly, donors have tended to impose conditions for aid, some of which may be unnecessary or even harmful to Nepal’s interests. But the other side of the coin is that those in government who finally decide whether to accept or reject such aid are free to set priorities for their nation and people, and it is here they have invariably slipped.

Severn Trent is now gone from Melamchi. But the project should stay. Nepal needs it, and ADB cannot fold up its operations here, either. Several options will come to the fore after the virtual departure of Severn Trent. First of all, though, the domestic option should be seriously considered — why not put the Valley’s water distribution management in Nepali hands? Questions about forms of ownership and management may then be considered. Lenders must be legitimately interested in whether their principal and interest are repaid in time and whether their loan is utilised properly for the prescribed purposes. These are areas in which Nepal’s multilateral donors should be strict, not in extraneous issues in the name of loan conditionality. The Nepalis would appreciate the donors highly if they could make the government crack down on corruption and inefficiency and unaccountability, as the donors themselves are widely perceived not to have done enough in this regard. The departure of Severn Trent will not resolve every problem regarding water distribution. For instance, the proposed multifold increase in the water tariff even before the Melamchi project starts supplying water will have to be scrapped, because it is grossly unfair and indefensible.