Minister for Physical Infrastructure and Transport Bimalendra Nidhi okayed the preliminary draft and forwarded the document to the Ministry of Finance, and the Ministry of Law, Justice, Constituent Assembly and Parliamentary Affairs on Thursday seeking their opinion on the document to develop the 76-km Kathmandu-Tarai/Madhes Fast Track to connect the capital with the Tarai region. MoPIT had continued negotiations with the consortium -- which includes Infrastructure Leasing & Financial Services (IL & FS), and then finalized the document this week even after parliament's Finance Committee directed it to put all negotiation processes on hold until a parliamentary subcommittee conducting a study submitted its report.
A team led by Finance Committee-member Keshav Badal has been investigating on issue.
A concession agreement is the final document before the signing of any deal between a government and a developer and includes responsibilities and key issues like project cost, concession period and royalty to the government.
The developer proposed a project cost of US$ 1,120 million in its Detailed Project Report (DPR).
Chief among the controversies surrounding the project deal include the providing of an annual minimum-revenue guarantee (MRG), and providing of US$ 750 million in loans on top of a US$ 150 million equity support grant.
Transport experts and a section of officials at MoPIT itself oppose the idea of providing loans -- which was not mentioned during the bidding process -- on the grounds that the facility was against international bidding principles as other bidders were not provided the same opportunity.
Both provisions -- investing of up to 81 percent of the project cost as well as an MRG to the developer -- are against existing laws and the Law Ministry's representative official in the negotiation team has said that the concession agreement on both issues need amendments in the Private Financing in Build and Operate of Infrastructures Act, 2007.
The dissenting government officials and experts also say the government should invite new bids, including a US$ 750 million loan facility to the developer. This would create sound competition among developers and also make the project cheaper than the estimated cost proposed by IL & FS. This would also have a direct impact on toll rates which are currently proposed at a rather high rate of Rs 800 per two-wheeler and Rs 1,500 per car.
The Finance Committee's Badal has refused to speak on the study so far saying that the subcommittee will only come out with the details after its report is out.
Sources privy to the recent developments say that the MRG was reduced to US$ 150 million from US$ 155 million during negotiations. People present at the negotiations, asking not to be named as they are not authorized to speak to the media, say the negotiation was a mere formalization of the process and that the minute of the negotiation, which incorporates only opinions of the two negotiating parties, was signed on Sunday.
MoPIT officials declined to speak about the development. Talking to Republica MoPIT secretary Gajendra Kumar Thakur accused the media of spying on the ministry and referred reporters to the ministry's spokesperson Devendra Karki, who told the media later that he did not have any information about the concession agreement document.
Asked about the main features of the concession agreement, project chief Satyendra Shakya also declined to speak.
Finance Secretary Suman Prasad Sharma has confirmed that MoF has received the document but has yet looked into it. Both the law and finance ministries have started studying the report and say it will take at least about a week for them to give their opinions.
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