Pokhara airport project hits snag over price tag
KATHMANDU, JUL 24 -
The Regional International Airport Project in Pokhara has courted controversy after the lowest bid received was 70 percent higher than the government’s estimated cost. The government had expected the project to cost around US$ 180 million (Rs 16 billion), but the lowest bidder, a Chinese company, has quoted a price tag of US$ 305 million (Rs 27 billion).
On Monday, four unions affiliated to different political parties warned they would launch a stern agitation if the Civil Aviation Authority of Nepal (CAAN) went ahead with the deal. The unions have even filed a complaint at the Commission for Investigation of Authority Abuse (CIAA) suspecting financial irregularities.
The unions are concerned by the deficit amount to fund the project. Under the Engineering Procurement and Construction (EPC) model, the government plans to borrow US$ 145 million (Rs 13 billion) in soft loans from Exim Bank to build the airport. However, with the lowest bid being nearly double the estimated cost, CAAN would have to take another loan.
“If CAAN obtains credit as per the current financial plan, it will have to pay around Rs 2.20 billion in interest annually for the Pokhara airport alone,” said Vice-president of Employees Union of CAAN Mahesh Timilsina, referring to the government provision that has an 8 percent interest on foreign loans to public enterprises. The authority currently has an annual income of Rs 3 billion.
Meanwhile, CAAN is upgrading Bhairahawa Airport into a regional international airport and Tribhuvan International Airport under a loan facility from the Asian Development Bank. “These loans together will require interest payments of Rs 4 billion annually,” he said.
“We are not against the project, but construction of the airport in Pokhara with such a massive loan as proposed by the company is directly linked with CAAN’s sustainability and its employee’s future,” said Daman Rawal, president of the CAAN Chapter of the Nepal National Employees’ Union. “So, we have demanded the scrapping of the deal.” The CAAN management is yet to submit its report to its line ministry. The unions said that if the government considers Pokhara airport as one of its dream projects, it can share certain amount of the project cost.
However, CAAN said that the project, which has been in limbo since 1975, should be developed in line with the country’s requirement and financial capability. “It’s natural to fear that a high project cost could lead to CAAN’s collapse, but we will attempt to balance the project in favour of both the parties,” said CAAN’s director general Tri Ratna Manandhar during an interaction with the authority’s employees on Monday.
Although, Manandhar refused to speak on the current development of the project, he hinted at reducing some of the project components to cut costs. “The tourism minister and secretary, and CAAN’s officials are in favour of developing the project in line with the country’s requirement and CAAN’s capacity,” he said. Ratish Chandra Lal Suman, general manager of Tribhuvan International Airport, said that the project’s viability can be ascertained only after calculating the appropriate balance between risks and benefits. According to Suman, Pokhara airport’s internal rate of returns (IRR) and its payback period report would determine whether it is appropriate to inject hefty amounts into the project.
Source: The Kathmandu Post
