India's IL&FS signs MoU for key Nepal road project

Indian infrastructure major IL&FS on Monday signed a memorandum of understanding (MoU) with the Nepalese government to prepare a detailed project report (DPR) for a key fast-track road project - considered one of national pride - in the Himalayan nation.

Satyendra Sakya, joint secretary in Nepal's ministry of physical planning, works and transport management and also the project manager, and Mukund Sapre, executive director of IL&FS signed the MoU.

The Kathmandu-Tarai Fast Track Road aims to link Nijgarh and Bara with capital Kathmandu, where the Nepal government is also planning to develop a second international airport. On completion, the road will be the shortest to link Kathmandu and India as Bara shares the border with India.

The DPR is expected to complete within four months, said Tulshi Prasad Situala, secretary in Nepal's ministry of physical planning, works and transport anagement, after the signing ceremony. The 76.2-km long express highway will be built on the BOOT ( Built, Operate, Own and Transfer) model.

After evaluating the financial and technical bids submitted by two aspiring Indian firms -- Orient Structure Engineers and IL&FS -- Nepal's ministry of physical planning, works and transport management Ahas finally picked IL&FS for the Rs.62 billion (Nepali Rs.100 billion) road project under an annuity model. Under the model, a developer is awarded the contract to build the project with the cost being paid to the developer on installment basis by the government after it is completed.

According to the MoU, the company that prepares the DPR will hold responsibility to construct the fast track road project.

"Later, if IL&FS does not construct the road after preparing the DPR, the government will pay the cost deemed to prepare the DPR to IL&FS," said Situala. IL&FS holds the rights whether to develop the expressway after completion of the DPR that includes the traffic volume, cost and benefit analysis.

Upon the completion of the DPR, the Nepal government will take a call whether to invest in the project or not, said Minister for Physical Infrastructure, Bimalendra Nidhi.

Spare FS, said that his company was here to invest in Nepal and not only to develop the DPR of the project.

"We will meet your expectation," said Sapre after signing the MoU.

(Anil Giri can be contacted at girianil@gmail.com)