Kathmandu, Nov 20 In a surprise move, Nepal on Sunday cancelled all agreements with India's Infrastructure Leasing & Financial Services Ltd for construction of a fast track road linking Kathmandu to the southern Terai region.
The Nepal government and IL&FS had in March earlier this year signed an agreement to prepare the detailed project report (DPR) for the $1 billion road project.
At a meeting of the Development and Finance Committees of the Legislature-Parliament, Nepal's Minister for Physical Planning and Infrastructure Development Ramesh Lekhak announced that all deals signed with IL&FS were no longer valid and all public announcements made by the Nepal government to develop the project were also cancelled.
The Nepal government has listed it as a national pride project and tabled a proposal for constructing the 76-km road with its own investment, he said.
Lekhak said: "Now all bodies concerned should make decisions standing together in course of taking the nation's pride project ahead."
The Nepal government will also compensate Rs 40 million to IL&FS, which the company spent for preparing the DPR and other paperwork.
There was a huge uproar after the then Sushil Koirala-led government awarded the contract to the Indian company.
Some experts had expressed concerns over the financial arrangement wherein the Nepal government had to reimburse the Indian firm if it incurred a loss.
Keeping that in mind, the K.P Oli government, which took over after Koirala, decided to construct the project from its own resources and allocated Rs 5.5 billion to construct the road.
In October 2015, Nepal's Supreme Court had issued an interim order halting the government's preparations to award the project to the Indian developer.
During the International Conference on Nepal's Reconstruction in June 25, 2015, Indian External Affairs Minister Sushma Swaraj had pledged to expedite construction of the projects.
"Work on construction of the Kathmandu-Nijgadh fast track road and the Nijgadh airport with India's participation be expedited. These projects will create new job opportunities, contribute to revenue, and facilitate long-term recovery," she had said.