New Fast Track Highway:New Fast Track Highway:Kathmandu – Birgunj in less than 2 hoursKathmandu – Birgunj in less than 2 hours

Dharma AcharyaDharma Acharya

Ponte Vedra Beach, FLPonte Vedra Beach, FL

April 25, 2009April 25, 2009

Phoenix, AZPhoenix, AZ

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Why do we need a new Fast Track Highway? Why do we need a new Fast Track Highway?

• The current route via Mugling, Narayanghat will not be able to handle the projected traffic growth

• A number of alternatives/bypasses will need to be added to the existing route

• The projected capital cost for such expansions will be quite high

• Kathmandu needs another good road link from Terai to maintain an uninterrupted service

• This link could also serve as a high speed link between Kathmandu and the next International Airport (if built around Simara/Nijgadh)

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Previous studies focused on linking Kathmandu to Previous studies focused on linking Kathmandu to Hetauda and included either tunnel(s) or elevated Hetauda and included either tunnel(s) or elevated concrete structures.concrete structures.

• Nippon KOEI Study, September 1990• Nepal Update (Acharya) Study, December 1992• FINNIDA Study, June 1993• Priority Investment Plan (PIP) Study, February 1997• KOICA Study, April 1999

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Terrain and existing highwaysTerrain and existing highways

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This study focused more on providing a direct This study focused more on providing a direct road link from Kathmandu to Birgunj, major road link from Kathmandu to Birgunj, major traffic originating/terminating points.traffic originating/terminating points.

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Among the four alternatives identified, the Among the four alternatives identified, the Kathmandu to MRM direct link (Alternative # 1) Kathmandu to MRM direct link (Alternative # 1) shows the best return on investment. shows the best return on investment.

Current Base * Alternative # 1** Alternative # 2 *** Alternative # 3 ****

via Narayanghat and Mugling

Along Bagmati River to MRM

Along Bagmati River and then to Hetauda with a viaduct (PIP)

With one Tunnel at Chisapani

(FINNIDA Alignment 2B)

Total Length (Km) 278 138 125 123New Construction (Km) 40 95 55 53

Existing Road (Km) 238 43 70 70Upgrading of Existing Road (Km) 58 0 12 12

Tunnel Length (Km) N/A N/A N/A 3.5

Overall Project Cost (NRs) 3,505,700,000 3,437,500,000 11,250,000,000 12,525,000,000 Overall Project Cost (US $) $46,742,667 45,833,333$ 150,000,000$ 167,000,000$ Economic IRR (%) N/A 30.5% 10.4% 12.4%

Kathmandu - Birgunj Direct Link Alternative Project Costs

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The costs of constructing new bypass roads and The costs of constructing new bypass roads and widening of existing roads to accommodate projected widening of existing roads to accommodate projected traffic growth will be about the same as in Alternative #1.traffic growth will be about the same as in Alternative #1.

Total Length (Km) 278New Construction (Km) 40Upgrading/Widening of Existing Road (Km) 58

1. Sitapaila - Dharke Road (by 2007)Length (Km) 25

Subtotal Sitapaila - Dharke (NRs) 605,000,000 $8,066,6672. Hetauda Bypass Road (by 2010)

Road Length (Km) 15Subtotal Hetauda Bypass Road (NRs) 510,000,000 $6,800,000

Total New Construction Cost (NRs) 1,115,000,000 $14,866,667

Upgrading Cost of Existing Roads:1. Widening of Mugling-Narayanghat Road (by 2005)

Length (Km) 36Subtotal Mugling-Narayanghat Road (NRs) 1,620,000,000 $21,600,000

2. Narayanghat Bypass Road (by 2015)Length (Km) 7

Subtotal Narayanghat Bypass Road (NRs) 77,000,000 $1,026,6673. Widening of Hetauda-Amlekhgunj Road (by 2015)

Length (Km) 15Subtotal Hetauda-Amlekhgunj Road (NRs) 375,000,000 $5,000,000

Total Upgrading Cost (NRs) 2,072,000,000 $27,626,667

Total Project Cost (NRs) 3,187,000,000 $42,493,333Contingencies (10%, NRs) 318,700,000 $4,249,333

Overall Project Cost (NRs) 3,505,700,000 $46,742,667

New Construction Cost:

Kathmandu - Birgunj Direct Link Alternative Project CostsCurrent Base: Via Narayanghat and Mugling

Current Base Route

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Alternative # 1 will connect Kathmandu directly to Alternative # 1 will connect Kathmandu directly to Mahendra Rajmarg with no tunnel(s) and the Mahendra Rajmarg with no tunnel(s) and the

construction cost of the 95-Km road will be lowest.construction cost of the 95-Km road will be lowest.

Total Length (Km) 138New Construction (Km) 95Existing Road (Km) 43

1. Flat to Rolling:Length (Km) 12

Unit Cost (NRs/Km) 25,000,000 $333,333Subtotal Flat to Rolling Cost (NRs) 300,000,000 $4,000,000

2. Hilly Area (Along the River):Length (Km) 66

Unit Cost (NRs/Km) 32,500,000 $433,333Subtotal Hilly Area Cost (NRs) 2,145,000,000 $28,600,000

3. Mountainous Area:Length (Km) 17

Unit Cost (NRs/Km) 40,000,000 $533,333Subtotal Mountainous Area Cost (NRs) 680,000,000 $9,066,667

Total New Construction Cost (NRs) 3,125,000,000 $41,666,667

Total Project Cost (NRs) 3,125,000,000 $41,666,667Contingencies (10%, NRs) 312,500,000 $4,166,667

Overall Project Cost (NRs) 3,437,500,000 $45,833,333

Kathmandu - Birgunj Direct Link Alternative Project Costs

New Construction Costs:

Alternative # 1Alternative # 1: Along Bagmati River and then to MRM

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Sensitivity analyses show that this project will still Sensitivity analyses show that this project will still be very attractive even under a very conservative be very attractive even under a very conservative scenario.scenario.

Sensitivity Analysis of EIRRVariation in AADT and VOC

0%10%20%30%40%50%60%

828 1,241 1,655 2,069 2,483

AADT

EIR

R

VOC=7 NRs/Km 10.5 14 17.5 21

Sensitivity Analysis of EIRRVariation in AADT and Project Cost

0%10%

20%30%

40%50%

60%

828 1,241 1,655 2,069 2,483

AADT

EIR

R

Cost=1.7 2.6 3.4 4.3 5.2

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Vehicles operating between Kathmandu and Vehicles operating between Kathmandu and Birgunj will be traveling 140 Km less. Annual Birgunj will be traveling 140 Km less. Annual savings in imported fuel requirement will be savings in imported fuel requirement will be substantial. substantial.

• Annual savings in fuel cost will amount to about 10% of the total project cost

• This translates to a reduction in foreign currency need of about $5 millions annually

• Just the fuel savings will payback the total project cost in 11 years

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Nepal will need to ensure a long-term Nepal will need to ensure a long-term commitment and consistent policies to attract commitment and consistent policies to attract private sector to invest in such public private sector to invest in such public infrastructure projectsinfrastructure projects

• Frequent government policy changes discourage private sectors

• No assurance that the investor will be able to collect tolls to cover for their initial investment

• In order to demonstrate the seriousness in involving private sectors, Nepal may initially like to partnership with the private sector in a couple of infrastructure projects

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In the event, neither the private sector nor an In the event, neither the private sector nor an international donor agency is interested in partnering in international donor agency is interested in partnering in this project, Nepal could still go ahead with this project this project, Nepal could still go ahead with this project on her own. This is so because the projected savings is on her own. This is so because the projected savings is substantial and will have a tremendous positive impact substantial and will have a tremendous positive impact to the country’s economy and society.to the country’s economy and society.

• Long experience gained in designing and building roads in mountainous areas by Nepali Road Engineers could be utilized

• A walk over survey of the proposed alignment needs to done next• A detailed feasibility study should also be conducted • The project could be phased-in over 4-5 year period so that the annual

capital budget requirement is kept at the minimum level by spreading the capital cost over multiple years

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2007 ADB Feasibility Study2007 ADB Feasibility Study

• Oriental Consulting Co. with ITECO and NDRI• Studied 5 Alternatives including a railway• 99 Km total to Pathlaiya and 82Km to EW Highway, 52 Km

to Budune (20 Km to Hetauda), (1.4 Km tunnels, $33m)• Project cost $242m (2 lanes), $554m (4 lanes), includes

21Km Hetauda connector from Budune• Distance saving of 150 Km and time saving of 4 hours• EIRR 37% for 2-lane and 18.6% for 4-lane (3A)• Least environmental and social impact• Savings of 5% total fuel consumption in Nepal (32m liters)

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Alternatives studied Alternatives studied

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Current Status of the ProjectCurrent Status of the Project

• Put on hold

• Bidding Process (switch from BOOT to PPP)

• Bank’s lending criteria tightened due to international financial situation– Identified Risks

• Forecasted traffic volume• Tunnel – no experience