Basis for negotiations with Fast Track developer 'unlawful'
KATHMANDU, Aug 30:
The government is preparing to provide soft loans of Rs 75 billion to the developer of Kathmandu Tarai Madhesh Fast Track going against existing laws.
The Private Financing in Build and Operate of Infrastructures Act, 2007 allows the government to invest a maximum of 25 percent of project cost. Loan investment of Rs 75 billion plus equity support of Rs 15 billion, as announced in the budget speech, will take total government investment in the project to 81 percent of the total cost.
According to DPR prepared by IL & FS, the total cost of the project is Rs 111 billion.
Officials of Ministry of Physical Planning and Transport (MoPIT) are holding negotiations with representatives of the Indian consortium for the past six weeks.
Sources, however, say the ongoing negotiation is unlawful. Former Secretary of MoPIT Tulsi Sitaula told Republica that Ministry of Finance has provided a written commitment on the proposed investment in the project. Sitaula took retirement four weeks ago.
A team of negotiators led by MoPIT's joint secretary Bishnu Om Bade is holding discussing with consortium representatives. Sources at MoPIT say Minister for Physical Infrastructure and Transport Bimalendra Nidhi is determined to finalize the issue even though it has faced legal complications.
Interestingly, MoPIT has not bothered to seek legal opinion from Ministry of Law, Justice, Constituent Assembly and Parliamentary Affairs (MoLJCAP) on the issue.
Talking to Republica, Law Secretary Bhesharaj Sharma said they have not been consulted on the issue yet.
Sources say Koshal Chandra Subedi, under secretary of MoLJCAP, who participated in some negotiation meetings, has pointed out legal complications on providing Rs 75 billion to any Public Private Partnership (PPP) project as well as providing minimum revenue guarantee of Rs 15.5 billion to the developer every year during concession period.
Law ministry sources say the government should start the process to make amendment to Private Financing in Build and Operate of Infrastructures Act, 2007, raising the ceiling of government investment in PPP project, if it wants the negotiations to be fruitful.
"The practice in other countries is to provide only Viability Gap Funding (VGF). Such investment, however, is only up to 49 percent and is given to only priority projects to make them viable," a source at law ministry told Republica.
After Subedi put forth his views in negotiation meetings, many negotiating officials have become hesitant to take negotiations further fearing corruption charges, a member of negotiation team told Republica.
Sources say Nidhi has confirmed that the government will lent Rs 75 billion to the developer by utilizing Government of India's additional Line of Credit.
The plan to provide soft loan to the developer has received wide criticisms. Experts say the country is in need of investment partners, not investment managers. With major investment coming from the government, they say the developer will have very little risk.
Dinkar Sharma, former joint secretary of MoPIT, said the essence of inviting private sector for large-scale projects like the Fast Track is to bring in investment, not provide them soft loans as proposed. "The idea of providing a longer concession period can be justifiable instead of taking risk of investing loan and guaranteeing minimum traffic," added Sharma.
Source: Republica
