Private companies awarded for managing public properties under Public Private Partnership (PPP) model have been misusing state properties for private gain as Kathmandu Metropolitan City fails to hold them accountable in accordance with contracts signed with them.
Himal Lamsal | CIJ, Nepal
On April 25 2015, a magnitude 7.8 earthquake reduced a nine-story Dharahara, an ancient iconic tower of Kathmandu, to dust. Side walkers P. Ltd, an organization awarded to manage restaurants and stalls around tower premises, however continued to collect rent from tenants using restaurants and stalls set up around the monument premises till May 26 2018.
A two-wheeler kept at a smart parking in Kichapokhari, Kathmandu.
But the Kathmandu Metropolitan City, which had awarded the private business firm to manage infrastructures around tower premises under the PPP model, hasn’t claimed its loyalty in accordance with the agreement since the earthquakes. Now, the KMC has been facing a legal case as the private business firm that had been making profit gain from public properties moved to the court against the local government.
Documents tabled at the Patan High Court show Side Walkers P. Ltd is owed to pay NRs 4683500. As the private firm continued to occupy the area around the tower even after the devastating earthquake the Office of the Prime Minister had to intervene the KMC instructing to discontinue bilateral agreement for rebuilding the quake-damaged monument.
Following correspondence from the PMO the metropolitan city formed a committee led by its revenue division chief Dhruba Kumar Kafle to negotiate royalty with the Side Walkers P Ltd. Later, the committee recommended to scrap the contract with a 30-day prior notice. But the KMC didn’t implement its own decision until prime minister KP Sharma Oli on May 24 2018 instructed to scrap the contract signed with the company immediately.
A day after instruction from the prime minister KMC demolished all restaurants and stalls built by Side Walkers P. Ltd.
After demolition, Side Walkers P. Ltd. on November 13, 2018 filed a case at the Patan High Court arguing that its contract with the KMC hasn’t expired. The Side Walkers P. Ltd, which is yet to settle due royalty to the KMC stated in the contract, claimed NRs 364788000 as compensation from the government.
Responding to the case Patan High court on February 23, 2019 ordered both the parties to hire mediators and settle royalty dispute. The KMC didn’t appoint mediators within deadline given by the court. Consequently, court endorsed senior advocate Raghav Lal Baidhya as a meditator as proposed by the company.
The royalty dispute hasn’t yet been resolved. “Due amount will be collected once the dispute is settled,” said Shivaraj Adhikari, revenue chief at the KMC.
The first contract signed between the two parties on April 13 2004 was renewed on February 5, 2012. Under the contract Side Walkers is entitled to collect fee from tower visitors, keep the monument neat and clean, preserve it and repair in case the iconic tower collapses among others.
Siddha Bahadur Gurung, president of Side Walkers’ P Ltd, refused to comment about the agreement arguing that the case is now sub-judice at the court.
Under the PPP model the KMC had signed another contract with BK Traders and Supplies. The company awarded to manage street solar light had agreed to pay 8700 from each electricity pole for allowing private advertisement, and hasn’t paid royalty to KMC as agreed.
Lhotse mall in Nyabuspark, Kathmnadu operated by Lhotsey Multipurpose Cooperative Pvt. Ltd.
As per the agreement BK Traders was entitled to install solar bulbs on 1285 electricity poles. Of late, the company has fixed only 860 bulbs and hasn’t paid royalty to KMC although it has been collecting fees from clients.
The company hasn’t repaired the street solar system either. As part of electrifying the metropolitan BK Traders and KMC had signed a street light contract on October 19, 2016.
Asked about delay in settling royalty Roshan Shreevastav, president of BK Traders’ and Supplies, said the royalty clearance was delayed after the KMC didn’t provide them certificate of work completion on time. “We approached them several times to obtain a certificate of work completion but in vain. As per the agreement we can deposit royalty only when we receive the work completion certificate,” said Shreevastav.
Conflict of Interests
Smart parking is KMC’s another project run under the PPP model. This project, however, isn’t free from controversy. Mayor Shakya awarded Rajiv Shrestha of Truly Yours and Prabesh Panta of Yes Guru Advertising for the smart parking project in Durbarmarg, Khichapokhari, Paako, Pyukha and Dharmapath for five years without open bidding.
Because of Shakya’s decision KMC has been losing more than 140000 revenue annually. An annual report published by the Office of the Auditor General (OAG) in the fiscal year 2019-20 states the KMC should have collected NRs 3691500 from the smart parking firm whereas only 2461600 was found deposited.
Shops in Kathmandu’s New Buspark being operated by City Markets
As per agreement signed between the two parties the companies awarded for smart parking were liable to deposit 20 percent royalty in the first three years since agreement and 30 percent in two years. Further, they had agreed to enhance new technology for monitoring parking fees. Since the stated technical infrastructure hasn’t yet been developed the metropolitan city hasn’t been able to monitor real time parking status and fees.
Lhotse Multipurpose P. Ltd, a private firm awarded to manage Gongabu Bus Park area under PPP model, hasn’t settled NRs 22170493 due royalty. The private firm has earned massive profit by building business complexes around the Bus Park area. The company, however, hasn’t paid royalty to the KMC for long.
Likewise, a deal was reached between KMC and Innovative Concept Nepal to manage overhead bridges in Kalanki, Gangabu, Buspark, Jamal, Bir Hospital, Nepal Airlines Corporation, Tri-Chandra Campus, Bag Bazaar, Ratnapark and Sundhara areas. Even as the Innovative Concept run by Manoj Kumar Bhetwal is making money after it bagged the contract under PPP model the company hasn’t paid NRs 11894000 to the KMC.
KMC’s revenue collection process is frustrating. It hasn’t collected rent from stalls under City Markets in the Old Bus Park area nor it has properly kept payment records. The local unit hasn’t reviewed the rent of 138 stalls constructed there since the last 13 years.
The report published by the office of auditor general states the KMC has to collect NRs 173600000 from these stalls in recent seven years even if it collects Rs 15000 from each stall as per existing rental market price. KMC should have to collect NRs 24800000 each year.
Of late, KMC has collected only NRs 39690200.
OAG’s report states KMC received NRs 16534000 instead of getting NRs 87300000 from fiscal year 2015-201 to fiscal year 2019-20. After finding mismatching details the anti-graft body had instructed the KMC to investigate NRs 70736000 outstanding dues and collect in accordance with the contract.
A clothing store is run by the Innovative Concept Nepal Pvt. Ltd under the skybridge. Photo: Himal Lamsal
Before City Markets, operator responsible for managing stalls in Old Bus Park, was brought under preview of KMC from the then City Hall Development Committee under Local Development Ministry an agreement was reached between the committee and contractor Surendra Prasad Dahal on June 1 2020 for managing the city hall and stalls. Shortly after the city hall management was brought under its jurisdiction KMC discontinued the contract effective from October 30 2014 citing the contractor didn’t honor the contract.
Dismayed by the KMC decision the contractor on April 15 2015 moved to the Kathmandu District Court seeking continuation of contract. Responding to the case the junior court on August 17 2016 didn’t favor the contractor. This means the contractor is now liable to pay NRs 19985100. Of late, KMC hasn’t taken any initiatives to collect due royalty from the contractor.
Asked about reluctance in collecting royalty from private firms, Mayor Shakya vowed to collect due royalty from projects under the PPP model at any cost. “I’m not aware about some companies not settling due royalties. KMC will receive revenue as per law,” he said.
Former Defense Minister Bhimsen Das Pradhan, who keeps a close tab on municipal activities, says all KMC projects awarded under PPP model have defamed reputations of the entire private sector. “By leasing out public properties to private sectors some responsible municipal officials have caused a huge loss to the state coffer. They are reluctant to collect due royalties as written in the contract because they get kickbacks from those companies.”
