Infrastructure Minister States Construction Price Hike is Highest in Nepal's History

Kathmandu. Minister for Physical Infrastructure Development, Sunil Lamsal, has stated that the current price hike in the construction sector is the biggest in Nepal's history.

Speaking at a meeting of the Infrastructure Development Committee under the House of Representatives, Minister Lamsal mentioned that this price hike crisis has severely impacted the construction sector and the nation's economy.

Minister Lamsal informed that the budget of the Ministry of Physical Infrastructure is under significant pressure due to the abnormal price increase in construction materials and fuel. According to him, based on data from about 20 days ago, the Ministry of Physical Infrastructure's budget was already in deficit by approximately 37 billion rupees. He stated that the price hike in diesel, in particular, has severely crippled the construction sector.

At the meeting, Minister Lamsal clarified that the government is aware of the halt in price adjustment (index freeze) for old projects and the legal complexities of one-year projects. Acknowledging that the central bank's current price index alone cannot address the current extreme price hike, he said the government is preparing a solution that will be fair to all types of projects and businesses.

He informed that the study of all types of contract documents and data is underway, as the state cannot discriminate by giving to some and not to others when making decisions. He mentioned that the decision-making process has been delayed somewhat because some problems require amendments to the law itself.

Expressing his views, Minister Lamsal said, 'This price hike before us is not ordinary. This is the biggest price hike in Nepal's history and a major crisis for the construction sector. Its impact is even greater in a country with a small capital like ours. Moreover, as of about 20 days ago, our ministry's budget had already gone into a deficit far beyond the limit for creating additional budgets. It was a deficit of about 37 billion. At that time, the price of diesel was also increasing significantly. The construction business or construction industry is the sector that consumes the most diesel. This resulted in a loss for the state and a great hardship for construction entrepreneurs. The price hike that can be given according to the central bank's index, as per legal provisions, could not address the current special situation alone.'

He added, 'Although it is legally easier to provide price hikes for multi-year programs, price hikes were greatly affecting projects that should have been completed years ago but had their deadlines extended and were 'index frozen'. Work was not progressing on such projects. Similarly, for one-year projects, although there is a legal provision to provide price hikes, it was not possible to provide them in all cases. The state could not make discriminatory decisions, giving to some and not to others. We had the challenge of making decisions that would encompass all types, all categories of projects, construction entrepreneurs, and projects down to the local level.'

'For that, we had instructed to collect data and study what all the contract documents are like. We have also assured the Federation of Contractors' Associations of Nepal that you will receive price adjustments and should continue work without stopping. The government needs work, so we will provide price adjustments. There are some complexities that we are resolving. Some things even require amendment and provision in the law itself. Since the problem cannot be solved 100% without amending the law, there has been some delay in the decision-making process. But I urge construction entrepreneurs to work with confidence. We have directly seen the impact on you. The government is not ungenerous or harsh on development matters.'

Minister Lamsal urged construction entrepreneurs not to stop work and to speed up construction activities. He stated that failing to immediately pave roads where the base has been prepared would cause significant damage to both the state and the entrepreneurs. Minister Lamsal also expressed his commitment to making development construction high-quality and timely by practically addressing the loopholes in the Public Procurement Act and regulations.