Kathmandu: The Asian Development Bank (ADB), major investor of Melamchi Water Supply Project (MWSP), has warned to cancel loan assistance for constructing tunnel of the project if water tariff hike does not take place. According to the sources at Ministry of Physical Planning and Works, the ADB has written a letter to the government on December 28 and warned to cancel loan assistance if water tariff hike does not take place as per its earlier condition.

The government had agreed to increase water tariff while taking loan assistance from the ADB. The ADB has provided 80 percent loan out of the total cost for constructing tunnel, main physical infrastructure of the project. The estimated cost for constructing 26.5 km tunnel from Melamchi of Sindhupalchok to Sundarijal of Kathmandu is over Rs. 5 billion. The government of Nepal will bear 20 percent of tunnel cost.
In a meeting held between the government and ADB last September, an agreement was made to hike water tariff before giving contract of tunnel construction. The Kathmandu Upatyaka Khanepani Limited (KUKL) had presented a proposal to Water Tariff Fixation Commission to hike water tariff by 30.7 percent for those who consume more than 10,000 litres in a month.
The commission has not decided on the proposal yet despite having several meetings. The ADB had pressurized the government to hike water tariff last year also. The then minister for Physical Planning and Works Hisila Yami informed ADB that she cannot hike water tariff at the time of Constituent Assembly election but she will fulfill the condition after the elections. ADB had waited till April last year.
In 2004, the ADB and the government had decided to hike water tariff up to 30 per cent in two phases. The basis cited by the ADB is that the tariff has to be hiked in keeping with the cost of operations.
Melamchi Water Supply Project stated that it has fulfilled all the procedures to give contract of tunnel construction. Gajendra Thakur, executive director of the project told that China Railway and Construction Company (CCRC), bidding lowest price out of the four bidding companies for the construction of the 26.5 kilometer diversion tunnel, has been selected for the construction but the ADB’s condition’s to hike tariff has been preventing the government to give contract to the company.
The government has to give contract to the company within January 26 as per the condition of the ADB. “If we could not give contract to the selected company, the tunnel cost will increase from Rs. 5 billion to Rs. 8 billion,” Thakur told Kantipur daily. The project officials are worried that the ADB will cancel its loan assistance if tariff hike does not take place. “If ADB’s condition is not fulfilled, Melamchi Project will not be completed,” Thakur said.
According to ministry sources, the government has urged the ADB to ‘wait’ for some days to fulfill ADB’s condition as the government is working on it. The commission meeting held on Sunday to decide on the proposal presented by the KUKL with the ADB’s pressure concluded without any decision. A member of the commission Ratna Sansar Shrestha told that the meeting concluded without any decision as the KUKL could not provide proper description about its improvement works including leakage control and proper reason to hike water tariff.
The sources accused two members of the commission are against the Melamchi project working to terminate the project. Maoist leader and then minister for Physical Planning and Works Hisila Yami had nominated B.K. Man Singh, Ratna Sansar Shrestha and Kumar Yonjon in the commission. Accusing that there was privatization in drinking water, the Maoists after joining the interim government for the first time had violated some conditions of the ADB. They had violated the decision of then government and ADB to manage drinking water of the Kathmandu Valley with the proposal to hike water tariff.
After the restoration of republic in the country, the then minister Hisila Yami had decided to give drinking water management of the Kathmandu Valley to the private sector as per the ADB’s condition. She had decided to bring three foreign experts in the KUKL to manage drinking water system in the Kathmandu valley.
The commission was formed according to the condition of ADB. KUKL and Kathmandu Valley Water Supply Management Board were established with the commission.

Source: Kantipur, January 5, 2009