The Melamchi drinking water project has hit a roadblock at the eleventh hour, when a foreign private company, Severn Trent Water International (ST), was on the verge of taking over the management of the distribution of drinking water in the Valley under a loan conditionality the Asian Development Bank (ADB) attached to its commitment of US$120 million, which accounts for less than one-third of the total project cost. The Nepali media splashed ST’s controversial records in several other countries, including Britain. Hisila Yami, the Maoist minister in charge of drinking water, has taken a firm stand against awarding the contract to such a company, all the more so because the pre-interim government had agreed to take it on without meeting the financial regulations on bidding for a contract. Amid the controversy, ST announced this week that it had withdrawn from the deal. However, ADB seems to insist that the ST conditionality should be honoured or it cannot keep its commitment. As much is reported to have been said by ADB officials in their meeting with Maoist chairman Prachanda on Wednesday.

Given the ST pullout and the adverse circumstances that have developed in the country for it, the issue should not be one of sticking to it, but of finding a way out to keep the Melamchi project alive. ADB was formed to assist in the development of poor countries and its partnership with Nepal is a long one. Sticking with ST sounds neither wise nor advisable in the emergent situation, as it would find a hostile environment in which to work and win public support after so much exposure of the negative kind. And it would impact adversely too on ADB in the eye of the Nepali public, as questions will be asked about its extraordinary interest in this company. Ideally, the concern of a development bank like ADB should be that the money it lends is spent in the project specified and that its principal and interest are paid in time. Extraneous conditionalities raise doubts about the motives of multilateral agencies, as ADB, the World Bank, and the IMF are not unaware of.

Certainly, questions of Nepal going back on its earlier commitment may also be raised. But when it comes to perceived national interests, much should not be made of Nepal’s credibility among the donors. Now the only wiser course would be to look at the management of water distribution in the Valley from a new angle. The question of why a foreign company, and not Nepalis themselves, should be favoured is yet to be convincingly answered. If the contract is to be awarded only to a foreign company or to Nepali ones alone, or to the best bidder in global competition, the matter should be settled first. But everything ought to be decided in a transparent manner in the interests of the poor Nepalis and that would entail steps aimed at cutting cost, plugging huge leakage of water, desisting from charging the consumers unfairly for water use, fighting corruption in water management, and exacting accountability. Everything is not lost yet. There still is time to make up.