KATHMANDU, Nov 20: Melamchi Water Supply Project has been asked to pay its Italian contractor Rs 350 million after the latter claimed compensation for lack of a working environment due to earthquake and the Indian blockade.
Italian company Cooperativa Muratori e Cementisti di Ravenna (CMC) claimed Rs 1.65 billion in compensation back in May for not having a working environment in Nepal due to earthquake and the Indian economic embargo of 2015. A dispute resolution committee was formed after the project declined to pay the compensation claimed by the contractor.
According to Chief Executive Officer of the project Surya Raj Kandel, the dispute resolution committee has asked the project to pay Rs 350 million to the contractor instead of the Rs 1.65 billion claimed by it.
The government has not made any official decision so far whether to pay the compensation amount or not. According to officials, the project has the option of seeking arbitration at a mediator tribunal, within 35 days.
“We still have options for arbitration, submitting a note of dissent to the committee's decision. But the decision should be taken by the government,” said CEO Kandel. As the application for arbitration needs to be filed from Singapore and it will be costly, project officials have been expecting a government decision whether to go for arbitration or not. But the project has decided to go for arbitration only after first paying the compensation amount to avoid paying interest on the amount.
Secretary at the Ministry of Drinking Water and Sanitation Gajendra Thakur said the government has been studying why the project was asked to pay compensation. “ If we think there is no strong reason for compensation we will choose the arbitration option,” Thakur said.
There was a three-member dispute resolution committee comprising a representative from the project, the contractor and an independent person nominated through consensus from both parties. Lekhman Singh Bhandari was the member nominated from the project while the two others were British nationals.
Section 20 (1) of the contract between the project and CMC has stated that the contractor can claim compensation if the company has to face loss due to strike, natural disaster or other reasons.
Meanwhile, the completion of the project is still uncertain, with the contractor delaying the work, citing various reasons. “We won't give a deadline for Melamchi water supply to Kathmandu. If the work is expedited as expected it would take about three months,” CEO Kandel responded when asked about the fresh estimate. The latest extended term of the contract with the Italian company expires on January 21, 2019.