How are national pride projects under the Physical Infrastructure Ministry performing?

There are seven national pride projects under our ministry—Mid-Hill Highway, Postal Raod, Kathmandu-Terai Fast Track, there North-South Highways and the East-West Electric Railway. The performance is mixed. Progress in the Mid-hill Highway is good.

Among the North-South Highway projects, there has been good progress in Koshi and Gandaki corridor, while the Nepal Army has been assigned for the implementation of the Karnali corridor.

Kathmandu-Terai Fast Track is being implemented under the public-private partnership model and it has reached the stage of Request for Proposal after the completion of Expression of Interest.

However, Postal Highway and East-West Electric Railway projects have performed poorly. Postal Highway is being built with Indian grant and an Indian contractor was employed. But after the contractor ran away, the project has stalled.

Work on the Electric Railway project has stalled due to the lack of resources. The project was listed on the national pride project’s list, without resource allocation. Now, it is a big problem.

Besides resource crunch, land acquisition problems have also hit the Electric Railway project.

Yes, we have also faced land acquisition-related issues. But the biggest problem is the lack of resources. We are constructing just a 5km section of the railway due to budget crunch. Under the current pace of work—5km a year—it will take several years to complete the 136km project. Currently, a local contractor is involved in the construction work, but the designs have to be done by an international consultant.

Will the railway project be developed under the public-private partnership model?

As the chances of the private investing in the project are slim, the government will develop this project on its own.

There is only one road project—Kathmandu-Hetauda Tunnel Road—being undertaken by the private sector under the PPP model. Tell us about the progress?

Completion of the financial closure is taking time although the original deadline expired three months ago. We first gave the project one year to do the job, and it is now demanding additional time for generating resources.

We are studying its proposal. The project agreement provisions that the government could extend the deadline if it wishes so. The or promoters say they are holding talks with a Canadian the company for investment.

A few other projects were also implemented under the PPP model. However, the model has not been much successful so far. Why?

In the case of road projects, Nepal lacks enough traffic to make the PPP model viable. It is difficult for investors to recover costs with the existing traffic volume. For the PPP model to succeed, we also need to mobilise domestic resources, not only foreign investment. Besides, a stable government is necessary.

Procedural redtape also discourages the private sector investment. That’s why work on amending the existing Act on PPP is under way. Deloitte India, a consulting firm, has submitted a draft PPP Policy and Act. Based on the documents, new law will be drafted.

You talked about the need of adequate traffic volume for successful PPP road project implementation. But the government’s policy discourages vehicle imports. This is quite contradictory.

That’s why the government has adopted the “viability gap funding” policy for important projects such as Fast Track. This means the government will compensate investors in the event of inadequate vehicular movement.

What are the major initiatives the new Act on PPP will take to make the PPP model a success?

It will reduce the procedural delay.

The compulsion to follow the Public Procurement Act has also emerged as big problem. What is the government doing to address this issue?

Amid complaints the existing Public Procurement Act is more contractor friendly, an amendment to Act is being prepared. It will address problems such as low bidding, in which contractors run away after taking the advance payment. As per the proposed provision, the government will be in a position not to award the contract to the lowest bidder if it finds the contractor not capable of carrying out the project. It will also discourage the tendency of single contractor occupying multiple projects, and use funds meant for one project in another.

Land acquisition has emerged as a big problem for infrastructure project. How are you addressing this issue?

We have not been able to acquire land at reasonable prices, due to irrational demand from locals. The problem is much serious in projects funded by donors. Many national pride projects have been a victim of such practices. A new Act on land acquisition has been prepared and it will be soon forwarded to the Cabinet for approval.