With this, the government’s efforts to select an investor for the project appear to have been in vain after selection procedures took nearly five years. The deadline for submitting the RFP ended on Sunday without receiving any proposals from the three Indian firms: the Reliance Infrastructure, the Infrastructure Leasing & Financial Services (IL&FS) and the Larsen and Turbo (L&T) Infrastructure Development Projects. Earlier, the government had twice extended the deadline for submitting the RFP.
“We did not receive proposals for the Fast Track road,” said Tulasi Prasad Sitaula, secretary at the Ministry of Physical Infrastructure and Transport. He added that the Fast Track Project Steering Committee, under the chairmanship of the Minister for Infrastructure and Transport, would soon hold a meeting to decide the next step to be taken for the construction of the road.
The firms were supposed to submit the RFP with detailed descriptions about the approximate construction cost, average annual maintenance operation cost, likely construction period, traffic, revenue forecast and feasibility.
After the firms failed to submit the bid documents in June, the Physical Infrastructure Ministry had extended the RFP submission deadline by three months as per the request of IL&FS and L&T.They had proposed undertaking a study on the possible impacts of the Kathmandu-Hetauda Tunnel Highway on the traffic of the Fast Track. The government has already permitted the Nepal Purbadhar Bikas Company to construct the tunnel highway.
Local partners and representatives of the Indian firms said that they failed to attract Indian firms, despite huge efforts, as companies were hit with the Indian government’s policy to limit companies’ investment in the foreign market and banks not finding logical reasoning to invest for the risk of a low return due to low traffic.
“Facts such as competing tunnel highway and possible low traffic volume have discouraged the Indian companies,” said Pramod Rana of the Evergreen Construction, a local partner of the IL&FS.The Indian firms were short listed after the third round of expressions of interest (EoI) was called by the government in July last year.
Based on the government provisions to allow local financiers to invest up to 10 percent of the project cost, the Evergreen Construction had joined hands with the IL&FS to invest in the project. Rana said the Indian firms study found that the planned road had a traffic volume of only around 5,000 vehicles per day, which was not enough to make a profit from the investment under the build-own-operate and transfer (BOT) modality.
The Fast Track road is projected to cost Rs 100 billion, and to do profitable business, the firm undertaking the project has to earn at least Rs 40 million per day from tolls,according to Rana. Mainly the L&T and the IL&FS showed interest over the project, the Reliance Infrastructure remained aloof since the beginning. According to Ananta Acharya, project manager of the Fast Track Project, even though they presented the Indian firms with a proposal of ensuring minimum traffic guarantee and sharing risk of possible loss, the Indian firms did not respond.
The demand for a minimum traffic guarantee had come as the firms feared a decline in traffic due to possible protests and road blockades, and the development of the tunnel highway. At that time, the Physical Infrastructure Ministry had also stated that it could extend the operation period of the road. The existing BOOT Act allows investors to operate the road project for up to 30 years.
So far, the government has invested around Rs 2 billion in compensation distribution for the land acquired and the track opening from Chhalnakhel, of Lalitpur to Nijgadh, Bara. A detailed feasibility study, conducted under the technical assistance of the Asian Development Bank in 2008, concluded that the project would cost Rs 78 billion and projected traffic of 10,000 units a day.
“Since it requires huge investment, the government should carry out the detailed project report (DPR) itself and invite foreign investors,” said Saroj Man Shrestha, former project manager of the Fast Track road.
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