Govt will pay Nu 99.3 mn reimbursement to Infinity/ILFS to terminate Concession Agreement of BEC

Infinity and ILFS will however have to show bills to claim the above

In a final step to bring closure to the Bhutan Education City (BEC) project, the government has agreed to pay Nu 99.38 mn to the BEC project developers Infinity and Infrastructure Leasing and Financial Services (ILFS) to terminate the Concession Agreement.

The amount is reimbursement to compensate the money directly spent by the two companies in the BEC project from its start to its closure.

Ministry of Works and Human Settlement Minister and BEC Board Chairperson Lyonpo Dorji Choden said that originally the two companies demanded Nu 163.620 mn as reimbursement costs for developing the project.

This breakup of the figure put forward by the two companies was Nu 30 mn for project development fees, Nu 36.60 mn for Detailed Project Report, Nu 54.24 mn for employee and overhead costs and travel and operating expenses, Nu 19.33 mn for pre bid expenses, Nu 14.42 mn for interests and Nu 9.27 for guarantee fees.

“The government negotiated with the two companies and brought it down to Nu 99.38 mn which was acceptable to both sides,” said Lyonpo.

She, however, clarified that since only the costs were being paid for money actually spent the Nu 99.38 mn would only be paid after original bills or bills verified by a public notary were submitted. The Ministry of Finance (MoF) and the Royal Audit Authority (RAA) will also verify the bills.

Of the Nu 99.38 mn the minister clarified that Nu 30 mn had been paid by Infinity and ILFS to DHI as project development fee for helping set up the project, marketing etc. Then Nu 32.13 mn is for the detailed project report and project consultancy fee incurred for the project. Nu 31.82 mn is for employee and other overhead costs. A final Nu 5.25 mn is for local coordination costs.

Lyonpo said that the entire process was a very vigorous one involving the Office of the Attorney General (OAG), RAA and the MoF along with the BEC Board.

She said that the government had consulted the OAG, RAA and MoF and found that it had to pay a certain amount due to the Concession Agreement signed by the former government with the two companies.  “The two companies said that the former government had allotted them the land and given various assurances and so they asked for reimbursement,” said Lyonpo.

The Bhutan Education City Act of 2012 was also a factor in the negotiations.

In the early stages of the discussion the government pointed out to the two companies that the BEC project would have to be closed give that the land leased for it was violating the National Land Act 2007 and other legal provisions.

“We told them that the government could not carry on with an illegal project,” said Lyonpo.

The government told the developers that unless they could agree on a reasonable reimbursement it was also ready to solve the matter in court.

The former government had issued a Nu 354 mn budget for the BEC project of which Nu 129 mn was spent on constructing the bridge and road and Nu 7 mn was spent by the BEC Secretariat coming to a total Nu  136 mn expenditure.

Lyonpo said that with the Concession Agreement now being terminated the government will be free to use the land and infrastructure to ensure that it is put to productive use for the country.

BEC closure timeline

-The cabinet in a meeting on 17th February 2014 decided to cancel the BEC project based on the several legal issues and objections raised by the National Land Commission over the proposed allotment of 1,000 acres of land to the project.

-On 4th March 2014 the developers were informed that the project is closed and to make no further investments in the project.

-On 29th August 2014 the first negotiation meeting was held were the developers asked for reimbursement of their expenses.

-On 10th November 2014 the developers submitted their Bills and RAA was asked to verify the bills.

-On 20th March 2015 the MoF and RAA submitted their verification reports.

-On 16th April 2015 the OAG conducted an internal meeting with MoF and RAA to help the government with the ongoing negotiations.

-On 27th April 2015 a second negotiation meeting was held

-The cabinet by late June and early July approved the Nu 99.38 mn reimbursement


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