The Civil Aviation Authority of Nepal (Caan) is “highly likely” to terminate its contract with Spanish contractor Constructora Sanjose for the Tribhuvan International Airport (TIA) improvement project, according to a high-level Caan source.

The $75-million project funded by the Asian Development Bank (ADB) “has not made any visible progress even after the contractor resumed the works last month; therefore, we are initiating the process to terminate the contract,” the source said.

The Caan had asked the contractor to resume the works at the international terminal building by July 15. “It resumed the work by the deadline, but it does not seem to be interested in working in other areas like runway expansion, construction of new taxiways and apron extension,” the source said.

“The contractor’s intention is clear now. It has been repeatedly demanding the government allow it to extract sand from the Pashupati area, which is not possible due to a court case.”

The project has been barred from extracting sand from the Pashupati area as the Supreme Court, which has issued an interim order, is yet to give its final verdict.

The Caan source said a verdict is unlikely soon. “The contractor has not even explored other alternatives and has been repeatedly arguing that it cannot resume works unless they are allowed to extract sand from the Pashupati area.”

The contractor has claimed Rs2.21 billion, including future claims, in compensation. “However, Caan engineers have estimated the compensation could amount to Rs60-70 million if they breach the agreement right now.”

The contractor still has until October 31 to start runway, taxiways and apron extension works.

The works came to a complete halt following the April 25 earthquake last year. However, as the project was beginning to stir back to life, a trade embargo last September caused a severe fuel and raw material crisis forcing it to stop again.

The air transport capacity enhancement project, which has been declared problematic, has the longest duration contract. Originally, the project was expected to be implemented over about 67 months since start in December 6, 2010. The project’s completion deadline was extended to 2015 and was moved forward to 2016, but after that looked unlikely to be achieved, the time limit was again extended to 2018. The physical progress of the project has been recorded at 17 percent only. 

After the completion of the project, TIA will be able to handle more than 5.85 million passengers annually and accommodate bigger aircraft.