Why NPBCL failed to mobilize investment?

Kathmandu-Hetauda Tunnel Project

KATHMANDU, Feb 3: Nepal Purwadhar Bikash Company Ltd (NPBCL) has failed to mobilize investment for Kathmandu-Hetauda Tunnel Project even though it has already been four years that the infrastructure project, which is estimated to cost Rs 35 billion, started.

Board members and investors of the company are pointing fingers at each other for the failure. Because of the dispute, NBPCL Chairman Kush Kumar Joshi tendered resignation on Sunday.

Investors criticize Joshi for his weak leadership and lack of transparency while collecting fund. His supporters, however, say the company could not apply for loan financing of Rs 28 billion due to failure to raise Rs 7 billion which was a prerequisite for loan financing.

Organizing a press meet in Kathmandu on Tuesday, a struggle committee led by former board member of NPBCL Raju Man Maharjan blamed Joshi's attitude and lack of transparency behind company's inaction over the past three years. "We wanted to change the chairman to move the project forward," he said, adding. "I was one of his staunch supporters. We had requested him to lead the company some five years ago," Maharjan, who hails from Kulekhani VDC, said. "Now we need a good leader, not a high profile figure, to execute the project."

Over 1200 locals, including poor farmers, from around two and half dozen Village Development Committees (VDCs) of Makwanpur and Kathmandu have invested in the project. They invested Rs 10,000 to Rs 100,000 with a commitment to invest up to Rs 100,000 to Rs 1 million, respectively. The company has so far collected Rs 310 million from around 1,800 small and large scale investors. It has spent almost all the amount for different preparatory works, including Detailed Project Report (DPR), according to NPBCL officials.

Locals, who have invested in the project, are among the most-affected. They don't know what will happen to the project now. Chandra Bahadur Ghalan, who runs a small-scale carpet factory in Naikap Kathmandu, had invested Rs 200,000 in the project five years ago. "But I don't know what will happen to the project," lamented Ghalan.

Subarna Lal Bajracharya, corporate chief of NPBCL, said they failed to attract large-scale investors to meet the equity portion resources. "Our plan to collect fund through pre-Initial Public Offering (IPO) met a legal bottleneck as there was no legal ground to get permission from Securities Board of Nepal (Sebon)," said Bajracharya.

Niraj Giri, spokesperson of Sebon, said that do not have any provision to issue pre-IPO. "We have now proposed for an amendment that incorporates this financing tool. But the amendment proposal is stuck in the Ministry of Finance," he added.

Bajracharya said they were in a difficult situation due to leadership dispute. "Canadian company Infrabanx Corporation is waiting to finance 80 percent of the project cost. But we have failed to arrange equity of 20 percent," said Bajracharya.

Republica's attempts to reach Joshi for comments failed.

Before issuing license to NPBCL four years ago, Ministry of Physical Infrastructure and Transport had formed a technical committee under former secretary Birendra Bahadur Deuja. But the license was issued on political influence without studying the technical committee's report. A cabinet meeting led by Khila Raj Regmi had issued the license to NPBCL.

While receiving license, the developers had pitched a new idea of developing million-dollar project using local investment and by local contractors. They had argued that it would be the first of its kind involvement of private sector in a Build Own Operate and Transfer (BOOT) project.

Bajracharya now realizes that their proposition of collecting fund from the market was faulty.

The company had given the company 12 month to achieve financial closure. But the government has remained silent even though 23 months have already elapsed.

"I am worried about small investments of poor people of the project affected areas rather than the project," a member of Deuja-led committee said.

An official of Sebon told Republica that NPBCL officials had not furnished satisfactory response on Sebon's concern on the fate of IPO investors if the project failed to materialize.

Swarnim Wagle, former member of National Planning Commission (NPC) Swarnim Wagle said credibility of the project should be considered in the project's financing. "Moreover, leadership in the company, low investment by the company leaders themselves and also traffic volume to be shared with Kathmandu Tarai Fast Track project under consideration by the government are other issues that might have affected company's plan to mobilize investment," added Wagle.

The next board meeting of NPBCL scheduled for February 10 will decide on Joshi's resignation and select the new chairman.