Financing models for Fast Track under discussion
KATHMANDU, May 26 : Nine months after the walkout by three selected Indian firms from the Kathmandu-Nijgadh Fast Track road project without submitting a request for proposal (RFP), discussions are now under way on different models for developing the mega project.
In a discussion organized by the World Bank Group on Thursday, donor partners, intellectuals and government officials focused on two models--public-private partnership (PPP) or government funding -- for the development of the express highway that will connect the capital with the southern plains.
A participant in the discussions talking to Republica but requesting not to be named said that the discussion focused on the pros and cons of the
available models and provided food for thought.
Under the PPP model, the private sector wants assurances of risk-sharing as financing entities in general press for assurances of returns on investment. Income from the road tolls is not yet assured.
However, intellectuals and some government officials and retired bureaucrats were of the view that government itself should funnel its recources into the project and develop the 76 km expressway as the bid to adopt the PPP model had already failed. They argued that the government could allocate Rs 10 to 15 billion annually for the project.
The project is said to be very important from both the economic and social point of view as it can reduce the travel distance to one-third. But the bid to award the project under a PPP model failed to woo investors, throwing the project into uncertainty. The government had invited an RFP under the Built, Own, Operate and Transfer (BOOT) model. The project´s estimated cost is about Rs 100 billion at present costs.
The three Indian firms selected for the project had walked out in September without submitting an RFP, fearing risks of return on investments.
Following their exit, the government had corresponded with the World Bank Group to step in and finance the national priority project. The group has expedited discussions with stakeholders in a bid to find the most viable model. Sources said donors are likely to opt for pool funding.
Meanwhile, the Ministry of Finance (MoF) is mulling a proposal submitted by IL & FS, one of the three Indian firms that walked out in September, on an Annuity model that was forwarded by the Ministry of Physical Infrastructure and Transport (MoPIT). MoPIT sought the opinion of MoF three weeks ago but is yet to get any response, according to MoPIT officials.
Under this project the developer is awarded the project contract and the government pays the contractor on an installment basis after it is completed.
IL & FS had floated the new model and proposed to develop the project if the government would invest 20 percent and provide a feasible interest rate on investment.
Secretary at MoPIT Tulasi Situala said that the construction company has also proposed open competition for fixing the interest rate. Under this model, the government collects the tolls after the project is completed. Meanwhile, Secretary Sitaula added that they are open about any model but the project should not be delayed any further in view of its importance.
Source: Republica
