Govt takes a detour on Fast Track road project

KATHMANDU:

Stunned by the high number of passenger car units (PCU) quoted by bidders, the government has decided to ask the lowest bidder to first prepare a detailed project report (DPR) of the Kathmandu-Tarai Fast Track road before signing the concession agreement.

Evaluation of financial proposals submitted by two Indian bidders shows that the annual PCU or anticipated traffic volume quoted in the expressway is high. India’s Oriental Structural Engineers and a consortium of Infrastructure Leasing & Financial Services (IL&FS) Transportation Networks, IL&FS Engineering and Construction and Suryavir Infrastructure Construction had submitted technical and financial proposals to undertake the construction of the 76-km Fast Track road.

Ministry of Physical Infrastructure and Transport (MoPIT) officials said that the traffic volume quoted is high and that the IL&FS-led consortium is the lower bidder in terms of the PCU it proposed. They said that the government will soon start negotiations with IL&FS for the DPR, which will give details on daily PCU, design and estimated total project cost, among others.

A detailed feasibility study conducted by Asian Development Bank (ADB) in 2008 had estimated daily traffic movement of 9,000 units (3.38 million in one year) in 2014 and government officials were expecting bidders of not quoting such high figures.

“We will first ask IL&FS to conduct the DPR, as neither the government nor the bidder has any precise idea on the possible volume of traffic,” said Satyandra Shakya, chief of Kathmandu-Tarai Fast Track Road Project. He, however, did not mention the PCU quoted by the two bidders saying that the financial proposals were still in evaluation phase.

To negotiate on the DPR and hold discussions on the rationale behind the high quotes, MoPIT will soon form a high-level committee comprising officials from National Planning Commission (NPC), Ministry of Finance (MoF) and experts. As per the plan, the government was first supposed to sign the concession agreement with a successful bidder quoting the lowest number of PCU for 25 years of project operation and carry out the DPR later.

As per MoPIT’s calculation, the total indicative design and construction cost of the Fast Track road stands at $968.85 million. Since the government has assured of guaranteeing minimum traffic to attract investment for the road under the build, own, operate and transfer (BOOT) model, quotation of high daily traffic by bidders plays a crucial role in the whole project. Going by the minimum traffic or revenue guarantee model, in case of a shortfall in the minimum traffic guaranteed in a particular year, the government will have to pay the bidder an equivalent sum caused by such deficit.

Similarly, if the traffic is more than the minimum assured, then the surplus revenue generated by this will be shared equally between the government and the bidder. In the request for proposal (RfP) document, MoPIT has fixed base average one way tool rate at Rs 1,558 per PCU, which too is being criticised of being high.

In 2010, a high-level government committee that prepared the procurement documents for the Fast Track project had said that the project will see movement of at least 5,000 units of vehicles per day and suggested one way tool rate at Rs 1,000 on an average.

Source: THT