National 7 (Spotlight Weekly)

Unnecessary Delay

The construction of middle Marsyangdi project is likely to resume after an unnecessary and avoidable suspension of civil works

By SANJAYA DHAKAL

After the uncertainties of last one and a half month, the mega hydropower project of Middle Marsyangdi is set to resume construction beginning February 1, 2004. But the precious times lost and its likely effect on the inflated cost will haunt the project for years to come.

The multinational contractor DDCJV had halted civil construction works raising various demands like guarantee of security, payment of back dues, approval of variation orders, concrete lining in the diversion tunnel, increasing the duration of project and so on.

However, the Nepal Electricity Authority (NEA) officials have reached to an understanding with the contractors to resume the project work. The agreement could be reached after the officials held two-rounds of meetings in Frankfurt, Germany in the presence of the officials of Kfw – the German Development Bank, which is providing the grant assistance for the project as well as Fichtner JV, the project consultant.

Sarbendra Nath Shukla, chairman of the NEA board and a senior minister, has said that an agreement has been reached to smoothly resume the project works. As per the fresh understanding, the civil works will resume from February 1, 2004 and be completed by December 15, 2006. He added that the agreement clearly points that NEA does not have to fulfill all those conditions put forth by the contractors.

Initially, the project cost was estimated around Rs 12 billion. But these unnecessary delays have caused it to rise considerably. The rise in the cost will be included in the new proposal, Shukla said. He added that NEA will pay the claims of the contractors based on the international FEDIC rules.

“The Federation of International Consulting Organizations (FEDIC) rules have many provisions regarding dispute settlement and arbitration. In fact, its rule say that if the contractors unilaterally cease their works, the client organization can even take over its assets and resume work by appointing another contractor,” said Dr. Ananda Bahadur Thapa, a water resource expert. “But since the middle-Marsyangdi is being constructed under the grant assistance of the German government, I don’t know whether they have included FEDIC rules in their agreement.”

The 70-MW strong Middle Marsyangdi hydroelectricity project is the only major hydropower currently under construction. The sudden decision by its multi-national contractors DDCJV to halt its civil works one and a half month ago had sent a chill down the spine of Nepalese officials as well as common people and that, too, for good reason.

Apart from this project, the country does not have any other big projects that can start operation within a decade and has put the country hard-placed to cope with the demand that is rising by 10 percent per annum.

Excepting the Middle-Marsyangdi, there are two other projects that are in the pipeline – Kulekhani III (40 MW) and Chameliya (30 MW). However, they are not going to be completed anytime soon as they have to be financed by donors. The Japanese International Cooperation Agency (JICA) is expected to construct the Kulekhani III. “We completed the feasibility study of the project two years ago. This project is on the cards after the completion of the middle-Marsyangdi project,” said Eitaro Mitoma, the resident representative of JICA.

“In the next one decade, we don’t see considerable projects coming in operation. Either the Upper Karnali (300 MW) or the Upper Tamakoshi-Rolwaling (250 MW) should come to fill this gap. However, these two projects cost at least US$ 500 million each and cannot easily materialize as our past experiences show. Each of them would take at least six to seven years to complete,” said Gobinda K.C., former General Manager-Generation at the NEA.

In view of these hurdles, the recent suspension of the middle-Marsyangdi could have had a lasting impact on country’s energy supply-demand scenario. Although it has resumed, there is a need to review the matters that led to its unfortunate and unnecessary suspension so that such things could be avoided in the days ahead.