The contractors have warned of halting projects if the government did not extend the deadline for around 3,000 projects.

They have demanded an extension by a year.

The contractors said as the government has not settled their payments and adjusted the cost of construction materials in line with the dramatic surge in inflation, they would be compelled to take to the streets.

They have given a June 19 ultimatum for the redressal of their grievances.

Rabi Singh, president of the Federation of Contractors’ Association of Nepal, told the Post that the government needs to take responsibility for all the issues in the construction sector.

“The problem in the construction has arisen because of the government's policies.”

The negative performance of the economy in the second quarter (mid-October 2022 to mid-January 2023) was triggered by slowed trade and deceleration of the construction and mining sectors.

As per the National Statistics Office, the seasonally adjusted growth rate or the gross domestic product (GDP) for the second quarter may drop by 0.73 percent.

This follows a nearly 0.34 percent drop in the first quarter (mid-July 2022 to mid-October 2022).

Singh said the government had issued tenders for the projects without knowing where the resources would come from.

A number of projects such as the construction of 300 hospitals, 180 strategic roads, cold storage, local government buildings, and irrigation projects were started at once.

But there were no resources to fund them after the government’s revenue stream dried up following the imposition of the imports ban which lasted for nearly eight months.

According to Singh, for example, a strategic road project would cost Rs 50 million, but the government allocated only Rs3 million.

Most of the projects were targeted at winning votes during the general elections held in November last year.

“We have requested the government to prioritise critical infrastructure. We have also requested the government to scrap unnecessary projects from the lists,” said Singh.

The government has said there is a deficit of Rs 400 billion in the current fiscal year.

Devendra Karki, a former government secretary, who once headed the energy and physical infrastructure ministries, told the Post that there is no logic in demanding a deadline extension for 3,000 projects. “This is an absurd idea.”

He added: “There are clear provisions in the contract documents regarding deadline extension and cost adjustments. Both the government and contractors need to abide by the law.”

Karki said that each project needs to be analysed on a case-by-case basis as each tender has its own terms and conditions. “To seek deadline extension for projects affected by the Covid-19 pandemic is an exceptional case, but it is not reasonable to make similar demands repeatedly.”

Last August, the government extended the project deadline for a year, citing Covid impact by amending the Public Procurement Regulation, in July.

The contractors said that they are optimistic that the government would offer them a further extension.

“Prime Minister Pushpa Kamal Dahal had assured us a day before his India visit that he would address the issues,” Singh said.

Nepal lifted all Covid-19-related restrictions in March 2022.

Then as per the law, there was no extraction of riverbed materials used in construction work, from mid-June to mid-October.

The national holiday—Dashain and Tihar—in October, further affected the projects. Then, the November elections disrupted the projects’ work further.

In January this year, the government ordered the closure of the crusher plants.

Again the economy started to slow down and the government was unable to pay the contractors.

This followed a stringent monetary policy as the interest rates on loans went through the roof. The fuel prices doubled.

“The diesel price, when we signed the project contract was at around Rs 100 per litre. It surged above Rs180 per litre,” said Singh.

“The government, in the past two months, paid us around Rs 25 billion,” Singh said. “It still owes us around Rs 70 billion in payments.”

Ramhari Pokharel, spokesperson at the Department of Roads, told the Post that there are payment issues in some projects due to a meagre budgetary allocation and the lack of transfer of funds.

“Some projects which were transferred to provinces after completion of the bidding at the federal level, have been in limbo,” said Pokharel. “But the contractors are highlighting such projects to extend the deadline of all projects, for the benefit of non-performing contractors.”

Pokharel said the contractors are worried since they have to pay the penalty for not completing the projects in the stipulated time period.