ADB breaks its silence, says it is not possible to
carry on with Melamchi

The Asian Development Bank (ADB) has said that it would not be possible to
carry on with project activities, after its current funding commitment on the
multi-million dollar Melamchi Water Supply Project (MWSP) expires on June 30.

Referring to the decision by the Minister for Works and Physical Planning
Hisila Yami not to award the management contract of valley's water distribution
system to Severn Trent Water International, the ADB has issued a statement, on
Tuesday, saying that "the inability of the Government to authorise the signing
of the duly negotiated management contract at this very late stage creates
considerable uncertainty on the way forward."

The ADB has said it wishes to encourage the Government to press ahead with
implementation of the institutional reforms started under the MWSP and Kathmandu
Valley Water Services Sector Development Program.

"A key provision of the loan agreement signed between the Government of Nepal
(Government) and ADB on 24 January 2001 was that the restructuring of the Nepal
Water Supply Corporation and award of a private sector management contract for
delivery of water services under competitive procedures must be completed prior
to initiation of civil works contracting for the construction of the diversion
tunnel from Melamchi Valley to Kathmandu. This provision of the loan agreement
recognised that the chronic water shortages affecting Kathmandu are caused not
only by a lack of supply infrastructure and bulk water resources, but also by
the poor management of water services" the ADB says in its statement.

The ADB says that signing of the private management contract was the very
last stage of a long process to achieve the agreed institutional reform for
efficient utilization of Melamchi's water. "This long process, which has
required six years of effort, cannot be completed now that the water utility
operator is unable to obtain approval from the Government to sign the duly
negotiated contract and the final bid validity has been withdrawn on 15 May 2007
(after nine extensions made since March 2006)," it says.

The ADB has added that the MWSP would have brought significant development
benefits to the people while providing a long-term solution to the water
scarcity problems in Kathmandu Valley.

"ADB has also made strenuous efforts and shown maximum flexibility to sustain
the Project at several critical times when it has been at risk over the past six
years. However, the inability of the Government to authorize the signing of the
duly negotiated management contract at this very late stage creates considerable
uncertainty on the way forward. As it stands now, it would not be possible to
carry on with project activities, with the Project due to close on 30 June
2007," the statement adds.

The agreement to award the foreign company the contract to manage valley's
water distribution was a precondition for the ADB to invest in the US$ 340
million project. The ADB is the leading donor of the project and has agreed to
provide loan of US$ 140 million for the purpose. However, senior Maoist leader
and Minister for Works and Physical Planning Hisila Yami refused to honour the
agreement (approved by previous cabinet led by the incumbent Prime Minister GP
Koirala) to award contract to Severn Trent claiming it had bad track record
elsewhere.

The Melamchi project aims to bring in 170 million liters a day (MLD) water to
the Kathmandu valley. The valley has been suffering from acute shortage of
drinking water – while its demands have shot up to 240 MLD, the supplies have
stagnated at 90 MLD.

nepalnews.com sd May 22 07

Severn Trent withdrew without consulting
ADB:

Asian Development Bank (ADB) has said the Severn Trent Water International
withdrew its water management contract for Kathmandu without any consultation
with the bank.

An ADB official in Kathmandu told Nepalnews they received only the contract
withdrawal notice mail from the British company.

The official said the bank has begun discussing its strategies under the new
circumstances after the government and the contracting agency made their stand
clear.

"We hope to make our position clear in a day or two. We had been waiting for
the position of both the sides on this issue since the business was between
them," the official said.

The decision of the Severn Trent has come after the cabinet meeting on Monday
failed to raise issue.

Minister for Works and Physical Planning Hisila Yami has been saying she is
not opposed to ADB but to Severn Trent 'given its bad track record elsewhere.'

In a letter sent to Minister Yami on May 18, ADB Vice President Liqun Jin had
said the bank might not extend any loan commitment to the Melamchi project after
June if the government did not find a management contractor. The ADB has put
condition that the contract of water supply in Kathmandu should be given to a
foreign company.

ADB is the largest donor to Melamchi project with its initial commitment of
US $120 million. It has also embarked additional US $45 million recently.
nepalnews.com ia May 22 07

Severn Trent Company:

href="http://www.stwater.co.uk/">http://www.stwater.co.uk/

. Melamchi River

ADB to pull out from Melamchi; Minister Yami says she is not against the project

In response to the news reports that the Asian Development Bank (ADB) is set to pull out from Melamchi Drinking Water Project, Minister for Works and Physical Planning Hisila Yami has said that she is not against the project or the ADB.

"We are not against ADB or Melamchi project. We know that Melamchi is important for the long term," she told Kantipur FM on Thursday morning. "Our only concern is that the government and the people should have the hold on the management of basic things like water," she added.

Following Minister Yami's decision to review the earlier agreement of awarding the contract of managing valley's drinking water to UK's Severn Trent company, the ADB headquarters has written an email to the Finance Minister Dr. Ram Sharan Mahat announcing its intention to pull out from the multi-million dollar project.

Citing its internationally discredited image and need to maintain government/public hold on water management, Minister Yami had made the decision to review the agreement – which has already been approved by the previous cabinet. This agreement (to award the foreign company the contract to manage valley's water distribution) was a precondition for the ADB to invest in the US$ 340 million project.

The ADB is the leading donor of the project and has agreed to provide loan of US$ 140 million for the purpose.

The Melamchi project aims to bring in 170 million litres a day (MLD) water to the Kathmandu valley. The valley has been suffering from acute shortage of drinking water – while its demands have shot up to 240 MLD, the supplies have stagnated at 90 MLD. nepalnews.com sd May 17 07

ADB warns of withdrawal from Melamchi

The Asian Development Bank (ADB) has warned of pulling out of multi-million-dollar Melamchi drinking water project after Minister for Works and Physical Planning Hishila Yami wrote a letter to the Kathmandu Valley Drinking Water Limited expressing the government's inability to sign management contract for valley water distribution.

According to Kantipur daily, Yami, who is a senior Maoist leader, wrote a letter stating that the government does not wish to go for management contract for the time being.

The ADB, when it agreed to provide loan assistance of $140 million to the project, had laid down the precondition that valley's water distribution management should be handed over to foreign private sector company.

The letter signed by acting Secretary at the Ministry Purna Prasad Kadariya states that the government will not provide 'letter of award' since the minister wants to take the proposal to the cabinet for reviewing the management contract.

Earlier, the cabinet had approved awarding the contract to a British company Severn Trent. As per the approval, the Severn Trent should have been handed over the management job by May 15.

On the other hand, the daily quotes sources as saying that Keichi Tamaki, an ADB official who looks after the project, has warned that failure to sign management contract would lead to revocation of the bank's assistance to the project. nepalnews.com sd May 09 07

Prachanda asks ADB to reconsider its decision on Melamchi

Maoist chairman Prachanda has asked senior officials of Asian Development Bank (ADB) Nepal Resident Mission to reconsider its decision regarding Melamchi Water Supply Project (MWSP).

Following ADB's statement announcing its intention not to renew funding commitment to the multi-million dollar project from June 30 onwards, the Maoist leadership held a meeting on Monday with ADB country director Paul Heytens.

The ADB issued the statement after the decision of Minister for Works and Physical Planning Hisila Yami, who is also a senior Maoist leader, to refuse to award management contract for valley's water distribution to Severn Trent company - in violation of earlier agreement.

During Wednesday's meeting, Prachanda urged ADB not to pull out of the project. According to senior Maoist leader Dr. Baburam Bhattarai, they asked ADB not to cancel the whole project because of differences over a small component.

The meeting took place at Naya Bazaar residence of Prachanda. Senior officials of Ministry of Works and Physical Planning were also present at the meeting along with Minister Yami. nepalnews.com sd May 23 07