Melamchi-CMC Row: Nepal Government Is In Wrong Footing

Melamchi-CMC Row: Nepal Government Is In Wrong Footing

Dec. 20, 2018, 4:48 p.m.

The recent decision of the Ministry of Water Supply and Sanitation to prevent the employees of Cooperativa Muratorie Cementisti (CMC),the contractor of Malachi Drinking Water Project, leaving Nepal with unofficial detentions put Nepal’s whole legal system under international criticism.

Although officials have yet to realize the consequences, Nepal will have to pay a big price for the directive given by Ministry of Water Supply and Sanitation to Immigration Department to prevent foreigners hired in Melamchi Drinking Water Project to leave Nepal on Monday night

With low cash flow, CMC has been demanding additional Rs. 390 million with the government as agreed between both the parties. Instead of taking consideration of CMC’s demand, Ministry of Drinking Water Supply and Sanitation directed Immigration Department to prevent all the workers in Melamchi to fly back their home.

Under a directive, Department of Immigration stopped dozens of foreigners including Chinese, Italian and Filipino and other hired in Melamchi Drinking Water Project leaving Nepal at TIA. CMC employees argued that they were on the way to home to celebrate Christmas and New Year. However, Ministry officials argued that they were fleeing Nepal.

According to Civil Code Act, there need a court order to stop the moment of any Nepali national. The case of foreigner is much different. Nothing can prevent foreigner leaving the country until and unless his or act against the country’s law.

Thanks to inhuman and illegal decision taken by Ministry of Water Supply and Sanitation, foreigners have started a question whether Nepal is a law abiding state?

“The incidents to stop foreigners at TIA Immigration without valid legal reason is against the law”, said a westerner on condition on anonymity. He said that this will send a wrong message to potential foreign investors about the personal legal guarantee in this country.

Secretary of Ministry Gajendra Thakur was reportedly a man behind the mid night drama. Secretary Thakur’s move not only pushes Melamchi again in uncertainty but also puts Melamchi Drinking Water Project contract in diplomatic controversy.

CMC, which has been building the project, is facing financial crisis recently at global level. Ministry’s officials argued that they took the decision on the ground that the company would abandon it due to its financial state.

However, a senior official of CMC, requesting not to be identified, has claimed that the company had submitted a request letter to release additional Rs.390 million as agreed upon to pay due to employee and staffs and expressed commitments to complete the work within time.

CMC has been claiming additional Rs.2 billion variation for disruption of work caused by earthquake, blockade and political activities. In the last meeting, government agreed to release Rs.390 Million to CMC to continue work. However, after recent instructions from the Ministry of Water Supply, the Melamchi Drinking Water Project refused to acknowledge the letter and release the fund.

Shankar Prasad Subedi, joint secretary of the ministry told The Himalayan Times that CMC had decided to abandon the project citing lack of funds. “The ministry has yet to decide what steps to be taken regarding the issue. We are firm that the company must complete the project at any cost,” Subedi told to The Himalayan Times.

According to Subedi, CMC wanted the government to provide additional funds, but the government had made it clear it would provide funds only after completion of the project.

CMC sources said CMC employees decided to go home for vacation after government declined to release money. As CMC has been currently involved in construction three major projects including Tanahu Hydro-power and Solu Hydropower with performance bond is over 8 billion rupees in Nepalese Banks, no one understands the reason behind Ministry of Water Supply and Sanitation to take such harsh action against CMC.

The Italian Company alone has Rs 3 billion in performance bond with Melamchi Drinking Water Project.

To create the situation further worse, secretary Thakur directed concerned officials to seize the money of CMC. “We have already directed Melamchi Drinking Water Development Committee to direct Nepali banks to seize the guarantee amount,” said Thakur. “We took this decision as the Italian company was intent on contract termination despite repeated requests to complete the project. The officials of the Italian firm also informed us that their company was on the verge of bankruptcy and they did not have adequate funds to complete the project,” Thakur told The Himalayan Times.

The current act of Nepal Government is against its own interest and it serves the interest of CMC even if the company is in wrong side. The recent incident gives CMC enough space to call Nepal in international arbitration showing how unsafe Nepal to work for foreigners.

The row between CMC andthe Ministry of Water Supply and Sanitation also put Asian Development Bank in delicate positions. With a project nearly completion, the row will likely to increase the cost and the time of the project.

What is Wrong with CMC?

So far as CMC disputes in Italy on its financial performance is concerned, it is dealing its legal case in Italy and Nepal has nothing to do with it. As a multinational company, CMC is involved in over 80 projects in 21 countries. It generates a huge chunk of revenue from projects owned by government and state-owned companies throughout the world.

So far as its own internal problem is concerned, its Press release issued from Ravenna, December 7th says:

Following the press release of 2nd December 2018, CMC communicates that, through a decree published today, the Court of Ravenna admitted the Company to the procedure of arrangement with the creditors, with reserve according to art. 161 subsection 6, of the R.D. 267/1942 (Italian Insolvency Law).

The Court of Ravenna provided 60 days for the presentation by the Company of the proposal of arrangement with the creditors, also appointing three Judicial Commissioners, Antonio Gaiani, Luca Mandrioli and Andrea Ferri. The Company’s Board of Directors keeps on carrying out the ordinary activities, while the Judicial Commissioners, besides expressing their opinion on the extraordinary acts, will supervise the activity of the Company. CMC favorably acknowledges the decision of the Court and, in relation to this, confirms that it is proceeding with the elaboration of the arrangement plan, in order to guarantee the continuity.

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