Experts for removing harsh terms and conditions
KATHMANDU, August 6 :
Experts have underlined the need to relax harsh terms and conditions set by the Indian government for effective implementation of Line of Credit (LoC) facility.
Indian Prime Minister Narendra Modi on Sunday announced concessional loans of approximately US$ 1 billion for Nepal.
Talking to Republica, Economist Posh Raj Pandey said that donors should respect the law of aid receiving land and let the recipient country decide on selection of projects, contractors and construction materials as per the Paris Declaration.
As per the conditions set by India, Nepal should use 75 percent of the cost of the project funded by concessional loans to acquire construction materials and workforce from India.
At present, Nepal is implementing 11 road, three transmission lines and one hydropower projects from concessional loans of $100 million announced in 2007 and $250 million announced in 2011.
Only joint venture companies, at least 51 percent of which are owned by Indian companies, can bid for road projects. Similarly, only Indian companies are allowed to bid for transmission lines funded by Indian concessional loans.
Conditions like these are imposed to give the benefits to Indian contractors and manufacturing companies, a government official told Republica, seeking anonymity. “
"Donors should respect procurement law of the loan recipient country. They should let the recipient county invite global bidders and use locally available construction materials whenever possible," Pandey said.
Nepal has to pay 1.5 percent interest as well as 0.5 percent service charge and 0.5 percent commitment charge for LOCs provided by India in 2007 and 2011. Charges and conditions for newly announced concessional loan are still unknown.
But the guidelines issued in July 2010 by the Ministry of Finance of India says that any Exim Bank Lines of Credit should have bidding process with eligibility of participation limited to Indian entities registered in India and or incorporated/established under any law of India.
Government officials fear the guidelines will make it difficult for them to implement large scale infrastructure projects effectively.
Talking to Republica, Jip Chhiring Lama, proprietor of Lama Construction Company, cticitized Nepali officials for not doing the needful to remove such unfair conditions imposed by India.
A joint venture between Lama´s company and Hari Chandra Limited, an Indian company, recently won the contract to construct Barjugad Martadi section of Sanfebagar Martadi road. It is one of the 11 road projects being constructed under Road Improvement Project (RIP) implemented by the Department of Roads.
The recent Nepal-India Joint Commission meeting has decided to relax the provision that required the government to acquire construction materials and work force worth 75 percent of the project cost to 50 percent. But we will need to wait for the Joint Letter of Credit Mechanism, a joint entity between Exim Bank of India and Nepal´s Ministry of Finance, for the relaxation to come into effect, Pramila Bajracharya, project coordinator of RIP, told Republica.
It is still unclear when the meeting of the Joint Letter of Credit Mechanism will be held.
"The provision is a burden for us as we have to import expensive Indian cements in place of locally available cheaper cement," added Lama.
Dipendra Bahadur Chhetri, former vice chairman of the National Planning Commission, said the provision that requires the use of Indian construction materials in projects run with Indian loan assistance will discourage domestic cement factories. "Such provisions should be removed," he maintained.
Saying that our absorptive capacity is eroding, Chhetri said there was no need to be euphoric about the newly announced line of credit. "Though there has been some progress in road projects implemented by DoR, the performance of three transmission lines and Rahughat Hydropower Project is unsatisfactory," he added.
Source: Republica
