Vice President of the Asian Development Bank (ADB) Jin Liqun said that it would be difficult for the bank to extend a loan to Melamchi project beyond June-end 2007 without the appointment of a certain contractor for managing Kathmandu Valley's water supply, local newspaper The Kathmandu Post reported Saturday.

He officially informed Nepali Minister for Physical Planning and Works Hisila Yami on Friday in a letter to Yami that overturning the cabinet decision of the previous government to award the contract to British firm Severn Trent Water International will not only hinder implementation of the Melamchi project, but also affect Nepal's status as Developing Member Country (DMC) of the bank.

As a DMC, Nepal gets loans and assistance from the bank's Asian Development Fund window, half of which comes as grant.

Stating that the bank is a reliable and good friend of Nepal, Jin urged Nepal to opt for full compliance with the critical covenant of awarding the contract for release of funds to Melamchi.

The bank said the future of Melamchi and aid to Nepal could be intact if the government gets fresh commitment from a cabinet meeting to honor the past agreement and persuades Severn Trent to take up the Kathmandu job. Severn Trent had given a "final" deadline of May 15 for the contract award, extending the deadline for the ninth time.

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 had announced its intention to pull out from the multi-million dollar project.

The earlier agreement to award the foreign company the contract to manage valley's water distribution was a precondition for the ADB to invest in the 340 million U.S. dollars project.

The ADB is the leading donor of the project and has agreed to provide loan of 140 million U.S. dollars for the purpose.

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.

Water demand in Kathmandu valley is up to 240 MLD, the supplies have stagnated at 90 MLD.

Source: Xinhua