Amochu Township project scaled down for now due to loan concerns

The 1,146 acres Amochu Land Development and Township Project (ALDTP) estimated to cost around Nu 14 bn, and create a new township for Phuentsholing has been scaled down for now due to loan concerns.

Though the Asian Development Bank (ADB) was interested to be the main financer for the project through loans, it was felt that that Bhutan was taking on too much debt burden and an associated risk by attempting to do the entire the project in one go.

The project owner Druk Holding and Investments (DHI) and the implementing agency the Construction Development Corporation Limited (CDCL) in consultation with the government had decided that it is best to proceed ahead and complete Zone A first, see how it does and then take it from there.

Loan and viability concerns

A key challenge for the entire project has been its economic viability compared to its cost. The current 450 acre Phuentsholing town took around 30 years to reach to its current level and there is already stiff competition from neighboring Jaigaon.

In December 2012 the then DHI-Infra now merged to CDCL had floated an international request for proposal to develop the 733 acres in the Jigmeling Industrial estate near Gelephu. Apart from publicly floating the RFP 50 top SEZ developers of the world in different countries were contacted.

The terms were generous with 433 acres being offered to the developer for a period of 30 years with numerous tax concessions at the time. The only condition was that Bhutan got 300 developed acres. However, even with all the carrots there was no interest shown in the project with the result that the government is now developing Jigmeling in a limited way.

The big concern is that in the case of ALDTP the government would be taking around Nu 14 bn in foreign currency loans to develop the township and it is counting on mainly investors and investments to pay back that loan through Industrial zones etc. If these investments don’t come, then the loan repayment would have to come from Bhutan’s limited developmental budget and it would leave Bhutan with a huge foreign currency debt that would not be self liquidating unlike the hydro projects.

However, DHI officials and those associated with the ALDTP project stressed that the entire project has not been given up as the master plan is still there.

There are a total of around 5 zones of A, B, C, D and E according to the CDCL MD Phuntsho Gyeltshen coming to a total of around 1,146 acres with Nu 14 bn in cost.

Zone A most urgent

Phuntsho said that Zone A is considered the most urgent and important part of the entire project because it involves flood protection of the left bank of the Amochu river which is urgently needed to protect the current Phuentsholing town. The outer reaches of the town experienced flooding during the 2017 monsoons as the Amochu breached its banks and swallowed some structures, vehicles and equipment.

He said that apart from flood protection the Zone A project would lead to creation of 162.88 acres of new flat land right next to the current Phuentsholing. This land would be used to create additional space for the current congested Phuentsholing township.

The MD said that the cost for this project would be USD 66 mn or around Nu 4 bn which would be financed by the ADB in loans with some grant element. He said this is compared to around Nu 14 bn for the entire project.

The main work in Zone A is to mitigate the erosion of the left bank of the river in a sustainable manner and so a river embankment of 4.8 meters in height supported by diaphragm wall of about 4.5 km length will be constructed along the left bank.

After securing the additional 162.88 acres generated out of this the project will then start developing the area as an extension of the current Phuentsholing town with road, water, electricity, road and other facilities.

CDCL was supposed to announce this Zone A tender in December last year, but it has been postponed to February this year.

The CDCL MD said that some formalities need to be completed which, once done, would mean that the awarding of works can be done.

One of the formalities is that given that ADB is funding the project it had insisted that as per its international best practices Bhutan had to get a no objection clearance from the lower riparian country India.

Though the issue was put up around two years ago through Bhutan’s Foreign Ministry for clearance of the entire project master plan, there has been some delay due to the slow bureaucratic process in India in giving an NOC.

The MD, however, said that he had been assured that the Foreign Ministry was taking it up and the clearance issue is in the final stages.

Phuntsho said that once the project is built, then it would be seen how well it goes and how viable it is before taking a decision on the other zones and phases.

He said zone A would take around three and a half years to complete from 2018 onwards which would mean a completion date around 2021.

This is compared to the estimated eight years for the entire project.

Of the various zones, Zone B is near the Amochu bridge area, zone C is across the river, zone D is near a hill and zone E is further on the other side.

Master plan

The overall master-plan of the Project envisages a 300 m wide, 4.8 m high channel to accommodate a 100-year flood of 7100 cumecs design. This is based on the extensive studies carried out by Danish Hydraulic Institute (India) in 2007 and again in 2013 and reviewed by the Integrated Detailed Project Report consultants HCP Design Planning and Management Pvt. Ltd (India), which was further vetted by the Project Preparatory Technical Assistance (PPTA) River Training Specialist, recruited by ADB.

As a result of training the river an area of 1146 acres of land in total was expected to be regained.

The township envisages development of a new town on the reclaimed land which would comprise of commercial, residential, special development areas, institutions, recreation areas etc. The new town is aimed to provide the much needed expansion requirements in Phuentsholing to address the current challenges of congestion and stress on existing infrastructure. The infrastructures that would be developed includes road network, water supply and sewerage and collection and treatment, power and telecommunication and flood warning system.