The government has claimed that the Melamchi Water Supply Project will be completed in time even if the Italian contractor Cooperativa Muratori e Cementisti (CMC) di Ravenna were to abandon the project.
Minister for Water Supply Bina Magar told the Finance Committee of the parliament on Thursday that the ministry is in dialogue with CMC, which is facing bankruptcy, to ensure that the schedule of the project is not affected despite the contractor stepping back citing financial problems.
"We are continuing dialogue with CMC," Minister Magar stated. "There will be no financial loss even if CMC were to abandon the project. There will, however, be delay in bringing water to Kathmandu if we start a new tender process."
Secretary at the ministry Gajendra Thakur also stated that discussions are on to ensure that CMC will complete construction and added that the government, however, will not suffer financial loss even if CMC were to abandon work.
"We want CMC to complete the project as far as possible. We have Rs 3.50 billion of CMC and the cost of the remaining work is only around Rs 2.60 billion. We, therefore, will not suffer financial loss even if CMC abandons work," he explained.
Reminding that the contract at the beginning was worth Rs 7.72 billion, he informed the parliamentary committee that around Rs 8.36 billion has been spent until now. He added that the estimated cost for completion of the project is around Rs 11 billion.
Minister Magar said the ministry has already corresponded to freeze CMC's money.
Thakur assured that the remaining work will be completed in time even by bringing in another contractor through a fast track bidding process if CMC stops working.
The government had promised to bring water from the Melamchi project, that started in 2001, to Kathmandu by October 2018 but it could not do so.
The government had brought CMC di Ravenna in 2013 after terminating the previous contract with China Railway 15 Bureau Group following their sluggish work. The Chinese company had constructed only 6.5 km of the 26.3 km tunnel from Ribarma in Sindhupalchowk till Sundarijal in Kathmandu and CMC was roped in to construct the remaining part of the tunnel.
The work of concrete lining 960 meters of the Melamchi tunnel is still remaining. Intake and closing the hydro-mechanical gate also have yet to be completed.
CMC is trying to abandon work claiming it has suffered a loss of almost Rs 1 billion. The company says it will continue construction only if it gets compensation.
Police had arrested eight Italian staffers of CMC including project manager of the contractor Cristiano Greco from Royal Penguin Hotel in Thamel Sunday night claiming that the octet was leaving by a Qatar Air flight later in the night without informing the government.
Police claim the eight were trying to abscond abandoning the project in pretence of going home to celebrate Christmas.
The Italian company that earned around US$ 15 billion, around 75 percent of that from infrastructure projects outside Italy, has been suffering from cash flow problems from the start of 2018.
Credit rating agency Moody's Investors Service in September had downgraded the corporate family rating (CFR) of CMC to B3 from B2 and its probability of default rating (PDR) to B3-PD from B2-PD due to its deterioration in liquidity and free cash flow in the first half of the year 2018.
