Another loan mulled to fund Melamchi cost overruns
KATHMANDU, NOV 20 -
The government is mulling requesting the Asian Development Bank (ADB) for another soft loan of US$ 30 million to proceed with the remaining tasks at the Melamchi Drinking Water Project (MDWP). The project aims to bring water to the parched Kathmandu valley from the Melamchi River in Sindhupalchok through a 26.5-km tunnel ending at Sundarijal.
The ADB has been the major donor to the project since the beginning, and has provided US$ 137 million in soft loans which is around 30 percent of the total project cost. The ADB has provided the soft loan at an annual interest of 1 percent under a special fund for under-developed countries.
Meanwhile, the government is preparing to start a fresh bidding process to appoint a new firm to complete the tunnel digging work after the previous contractor China Railway 15 Bureau Group was fired.
The project cost is expected to go up by 40-50 percent from the current estimate of US$ 464 million (Rs 4.28 billion). According to the Melamchi Drinking Water Development Committee (MDWDC), the implementing body, cost overruns could amount to US$ 35 million.
“Around US$ 95 million will be needed to complete the project. The board has US$ 70 million with it, and the rest will be mobilized with a soft loan from the ADB,” said Ghanashyam Bhattarai, deputy director general of the MDWDC. Bhattarai added that there was no immediate need to borrow from the ADB as the board had enough money to complete more than 70 percent of the remaining work.
“Moreover, we will have to pay 0.5 percent additional interest as commitment charge once the loan agreement is signed,” said Bhattarai, “So we will ask the ADB for a loan after the tender notice for a new contractor is issued.”
The ADB agreed in principle to provide another soft loan for the project after the government terminated the contract with the Chinese firm. Juan Miranda, director general of the ADB’s South Asia Department, also pledged to increase the amount of aid to complete the project during his visit to Nepal in September.
The Rs 4.28-billon contract for the MDWP was awarded to the Chinese company on condition that it would construct 700-800 m of tunnel monthly and start work from four points simultaneously.
The board has paid Rs 510 million, 35 percent of the contract amount, to the previous contractor. It has also confiscated Rs 428 million, 10 percent of the performance security, from the Chinese contractor.
Source: The Kathmandu Post
