Nepal: ADB Backs Huge Infrastructure Project to Ease Water Shortages

Published on: 09/02/2008

MANILA, PHILIPPINES - A delayed water-supply project in Nepal that includes tunneling 26 kilometers through a mountain to ease chronic water shortages in Kathmandu looks set to proceed, after the Asian Development Bank (ADB) agreed to new terms for the project for which it is the lead financier.

ADB initially agreed to support the Melamchi Water Supply Project in 2000, but changes since then have seen the cost lowered from $464 million to $317.3 million with careful prioritization and phasing of the project components. Work was delayed by political circumstances and challenges engaging private sector partners.
Source: ADB, 8 Feb 2008

In 2005 the former executive director of the Melamchi Water Supply Project committed suicide and a former Prime Minister of Nepal was arrested

The Government of Nepal is providing around US $90.6 million to the project. Other donors for the project are the Japan International Cooperation Agency, Japan Bank for International Cooperation, the Nordic Development Fund and the Organisation of Petroleum Exporting Countries Fund for International Development.

[...] the implementation of the project will be separated into two sub-projects, with the water diversion tunnel under the first sub-project and the water supply and sanitation segment under the second.

ADB has also agreed to remove a loan covenant requiring the award of a private sector management contract to support the new utility as a precondition for awarding the tunnel civil works contract.

Source: The Rising Nepal, 8 Feb 2008

In 2005 the former executive director of the Melamchi Water Supply Project committed suicide and a former Prime Minister of Nepal was arrested followed allegations of corruption surrounding the project.

The Asian Development Bank (ADB) had made the establishment of an autonomous water utility operator for Kathmandu, the Kathmandu Upatyaka Khanepani Limited (KUKL), a condition for continued support to the Melamchi Water Supply Project . There were allegationsthat Maoist leader Dr. Baburam Bhattarai had pressurised the members of KUKL to appoint Janak Raj Shah as chairman in November 2007.

Activists have opposed the Melamchi Water Supply Project, in particular the efforts of the ADB to involve the private sector. A campaign led by Water and Energy Users' Federation – Nepal (WAFED) in collaboration with the UK-based World Development Movement (WDM) against the award of the management contract to Severn Trent Water International had forced the British multinational company to withdraw in 2007. In a statement issued in reaction to the ADB press release of 8 February, WAFED objected to the ADB's intention to recruit a new private sector manager parallel to the construction of the 26 kilometer long Melamchi River diversion tunnel to Kathmandu. WAFED also claims that the Melamchi Water Supply Project is unnecessary. It says the best option is to plug the leaks in the existing water system and to make use of alternative sources water sources such as regulated ground water use, rain water harvesting, spring water and public taps.

Other critics, such as Bhushan Tuladhar of ENPHO, have pointed out that the Melamchi Water Supply Project is technically, financially and socially flawed. The project, which was designed to meet long term water needs of Kathmandu Valley will not even be able to meet the short term water demand, they say. Furthermore the project will take up about one third of the country's total water and sanitation budget, while only serving 5% of the population. Finally, there are indications that communities located near the intake works and those located downstream may block the project if they do not share in the benefits. To overcome these problems a Multipurpose Melamchiplan has been launched, which will bring in more water and benefit more people by adding a hydropower and an irrigation component.

Source: ENPHO E-Bulletin via the NGO Forum for Urban Water and Sanitation, Feb 2008