The proposed fast track highway linking Kathmandu with Nijgadh, Bara in the Tarai plains is one of the national pride projects. The estimated Rs 100 billion cost of the 76-km expressway is equivalent to almost 20 percent of the government’s annual budget.
The WB’s interest in the fast track plan has come at a time when the government is desperately looking for funding. “The WB has verbally asked us to approach it with a formal request if we are interested in getting a soft loan for the project,” said Tulasi Prasad Sitaula, secretary at the Ministry of Physical Infrastructure and Transport.
Sitaula added that the WB would carry out a study to decide whether to invest in the project or not if the government asks for a loan. As the construction of the fast track would require massive funding, the WB will look for a tie-up with other development partners if it thinks that the project is feasible, according to ministry officials.
Meanwhile, a source at the WB confirmed that there had been talks between the two sides to fund the project. “The bank has asked the Nepal government if it is interested in obtaining a loan through the Bank for Reconstruction and Development (IBRD) whose interest rates are relatively higher,” said the source. “The IBRD provides loans to middle income countries at a rate of interest which is usually above 3 percent.”
The source said that the proposal had been made as funding through the International Development Association (IDA), whose loans are virtually interest-free, would not be adequate to finance a large project lie the Fast Track. Nepal has not taken loans from the World Bank through other windows except the IDA. This is the window designed for the poorest countries of the world.
The Road Sector Development Project (RSDP) has received US$ 100 million from the World Bank, which is the highest ever for any road project, according to Sitaula. Road development, institutional strengthening and policy reforms are carried out under the RSDP.
After the government’s plan to build the Kathmandu-Tarai Fast Track under the build, own, operate and transfer (BOOT) model failed miserably, it has been examining its options to construct the highly prioritized project. The government spent five years planning the project which was envisaged to be built under the BOOT model, and the failure to convince interested investors has emerged as a wake-up call.
Three short listed Indian companies -- Reliance Infrastructure, Infrastructure Leasing & Financial Services (IL&FS) and Larsen and Turbo (L&T) -- which had been asked to submit requests for proposal (RFP) to invest in the project walked away in September.
In a bid to find ways to finance the expressway, a five-member technical committee under the coordination of Secretary Sitaula is carrying out a study to make recommendations to the government. The first meeting of the committee has identified donor support as one of the best ways to implement the project.
“We will make a number of recommendations to the government soon,” said Sitaula. He added that besides undertaking the project with the help of donors, there were other options like proceeding in phases by building two lanes instead of four lanes, and allocating funds annually in the government budget.
The committee is planning to submit its study report to the government before a new administration takes over. However; as the fast track is a priority project and related decisions will have a long-term impact, the present government might leave it to the incoming administration, an official at the ministry said.
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