Wednesday, June 17, 2015

Five years down the line KKH Tunnel Road still a pipe dream

Nepal Government permitted Purbadhar Bikas Company Ltd (PBCL) to construct Kathmandu-Kulekhani-Hetauda (KKH) tunnel road in 2012. The private infrastructure company planned to complete the road in four years. But the road project has not been able to move forward.
Ministry of Physical Planning and Transport had permitted PBCL to start the mega project – the first project under the Build-Own-Operate-and Transfer (BOOT) Act in Nepal – that was supposed to be operational by the end of 2016.
The project that could have become the successful PPP was and still is commercially viable as it would save travel time and cost. Currently, the distance between Kathmandu – the Nepalese capital – and Hetauda through the existing Tribhuwan Highway is 133-km and through Prithvi Highway, it is 227-km with around a six-hour driving time. But the KKH tunnel road is expected to shorten the travel time to only one hour and distance to 58-km.
The KKH tunnel road could also bring socio-economic transformation as it would not only connect people to the market but also bring changes in their lifestyle. Likewise, the express way would also save around Rs 15 billion annually on fuel and spare parts.
The Asian Highway standard 58-km tunnel road with three tunnels is planned with a four-lane expressway that would not only save time and fuel but also create new economic hubs at the sides of roads, besides helping shift population pressure from the Kathmandu valley.
The PBCL was planning to mobilise funds from four parties — private sector, locals, government, Non Resident Nepalis (NRNs) and financial institution — with each party having 25 percent stake. It has also prepared Detailed Project Report and got good support from the government as the concessioner. The government has awarded the company the project licence for 30 year with five year extendable option. It also has the option to change the toll rate on the request of licence holder. The government has also agreed not to charge any royalty from the project during the construction period. It has promised to help acquire private land, guaranteed not to nationalise the land, buildings, investments and infrastructure of the project.
Initially, the project was estimated to cost Rs 20 billion but the delay in decision by both the parties has increased the cost to Rs 34.5 billion from the earlier estimation.
The tunnel road that has a payback period of eight to 12 years, as users will have to pay toll fee, would be transferred to the government in 30 years. The project with a commercial viability, reasonable return, and guaranteed traffic failed to kick start due to government's emotional decision to award to only one company that was pushing the project. The government did not bother to call for competitive bidding and awarded the contract to the one that was lobbying for it.

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