Govt, NPBC sign final pact for tunnel highway

KATHMANDU, MAY 18 - Decks have been cleared for Nepal Purbadhar Bikas Company (NPBC) for the development of the Kathmandu-Hetauda Tunnel Highway.

A year after signing a preliminary project agreement (PPA), the government on Tuesday signed the final (concession) agreement with NPBC to construct the highway. The Ministry of Physical Infrastructure and Transport is working to issue the letter of commencement soon asking the company to start project work.
The 58-km highway is estimated to cost Rs 34 billion. NPBC said the length and investment increased after the government asked the former not to overlap the highway’s alignment with Kathmandu-Tarai Fast Track road.

As per the PPA signed on May 14, 2012, the tunnel highway that links Kathmandu with Hetauda via Kulekhnai was expected to be around 51 km long and the cost was estimated at Rs 20 billion. NPBC had targeted to start the construction work four months ago. However, the project work had stalled with the government delaying the concession agreement, expressing reservations over the alignment and project financing.


“We hope to receive the letter of commencement within a week from the government,” said NPBC President Kush Kumar Joshi. He added as soon as they receive the letter, they will fix a date for formal start of the construction. The company plans to complete the project within 4 years.

NPBC will develop the project under a new concept of ‘4P’ modal—private, public, people partnership.
The private sector, local government bodies, Nepalis living abroad and the general public are investing in the project. The highway will have tunnel link of around 4.5 km

in three locations. The tunnel stretch alone will need an investment of over Rs 10 billion.
The Physical Planning Ministry, through a minister-level decision, decided to sign the final agreement after NPBC submitted investment commitment from nearly two dozen commercial banks.

The ministry official added the company has been granted an operation period of 30 years under the Build-Operate-Transfer (BOT) modality, although the company had proposed a 35-year operation period.
The company had demanded the government permit it to operate the road for up to 35 years to make the project more attractive and increase the payback period as the first four years are required for construction.
Another ministry official said the final agreement had been delayed due to issues like overlapping of the tunnel highway with the Fast Track Road, operation period of the highway and credible financing bases.

The official said some top-level ministry officials were against the signing of the final agreement and had also sought some more time saying the move could discourage potential international investors in the 76-km Fast Track Road.

After NPBC’s project plan overlapped 3.5 km alignment with the Fast Track, the ministry had directed the company to either avoid the overlapping or come up with ideas on how the alignments could be integrated without affecting the interests of investors.

The ministry is also working to select investors for the Fast Track road. The bid submission date for the Fast Track is expiring on May 21.

Three Indian firms—Reliance Infrastructure, Infrastructure Leasing & Financial Services (IL&FS) and Larsen and Turbo (L&T) Infrastructure Development Projects—have been shortlisted as eligible firms and invited to submit the request for proposal to develop the project.

**