KATHMANDU, AUG 06 -
A fact-finding committee entrusted to look into financial and technical hurdles that appeared in the planned Regional International Airport project in Pokhara is likely to submit its report to the Civil Aviation Authority of Nepal (CAAN) soon.
The committee members said that they have already prepared the report which would be submitted to CAAN board within this week. They refused to divulge the details but said that the report would suggest ways to remove the obstacles and pave the way for the construction of the project.
The four-member committee was formed under the coordination of Ranjan Krishna Aryal, chief at the legal division of the Ministry of Culture, Tourism and Civil Aviation (MoCTCA), a week ago to expedite the project by removing the obstacles that have emerged in the bidding process.
“As the lowest bid was much higher than the government estimate, we are reviewing ways to take the project forward by sticking to all the legal requirements,” said Aryal. Government officials said that the project cannot be halted, and that problems should be sorted out so that construction work can begin.
The much talked about airport project has ran into controversy after the lowest bid was much higher than the government’s estimated cost. The government had expected the project to cost around US$ 180 million (Rs 16 billion), but the lowest bidder, a Chinese company, has quoted a price tag of US$ 305 million (Rs 27 billion).
Under the Engineering Procurement and Construction (EPC) model, the government plans to borrow US$ 145 million (Rs 13 billion) in soft loans from Exim Bank to build the airport. CAANofficials said that with the project’s support, Exim Bank could lend as much as US$ 270 million to the government.
A knowledgeable CAAN source said that the lowest quote for the contract was only the expected cost, as the real cost would be determined only after its designing or engineering is completed.
However, with the lowest bid being nearly double the estimated cost, CAAN unions have expressed serious concern that it may have to take another loan resulting in a massive debt burden.
Meanwhile, people of Pokhara have demanded that the project be executed this time as it has been on ice since 1975. They have warned of launching a protest if the government does not construct the airport.
CAAN unions said that if the project were to obtain credit as per the current financial plan, it would have to pay around Rs 2.20 billion in interest annually for the Pokhara airport alone. As per government regulations, an annual interest of 8 percent is charged on foreign loans to public enterprises.
However, government officials said that the interest rate on soft loans from Exim Bank was 1.75 percent, and that the annual interest would come to around Rs 472 million. “As airport infrastructure is funded by the government or government-backed loans, CAAN unions do not have to worry about it,” said a government official.
The government and the Japan International Cooperation Agency conducted a detailed study for the airport project in 1989. It had proposed a runway 2,500 m long and 50 m wide, a terminal and a cargo building.
Construction of the airport, which was expected to be completed in four years, was estimated to cost of US$ 39.6 million at the time. A new study has estimated that the project will now cost more than US$ 180 million.
CAAN invited bids for execution of the project under the engineering procurement and construction model on Feb 9, and extended the deadline twice due to intervention by the Commission for Investigation of Abuse of Authority (CIAA).