Japan has agreed to provide Rs 15.81 billion in soft loan for the construction of the proposed Nagdhunga-Naubise Tunnel Road Project. 

The 2.5km tunnel planned to be dug under the western rim of Kathmandu Valley will cut the travel time over the mountainous route—currently the main gateway to the Capital.

Officials of Nepal government and the Japan International Cooperation Agency (Jica) confirmed two sides concluded the negotiation on Thursday, enabling Nepal to secure 16 billion Japanese Yen (Rs15.81 billion) for the project.

The two sides had held negotiations on Wednesday and Thursday. According an official at Jica, the Nepali negotiating team has said that it will give comments on the agreed document within a few days. Then, it will go to the Cabinet to decide on whether to accept the loan as per the agreement reached during the negotiation. “Once we get the Cabinet nod, we aim to sign the loan agreement within December,” said a member of the government’s negotiating team. 

 The Jica official also the told the Post that “it is up to the Nepal government whether to accept the loan as Japan is ready to extend the soft loan”. As per the agreement reached between the two sides, Nepal will have to pay 0.01 percent interest, one of the lowest rates, according to Jica official. The repayment period is 40 years, including a 10-year grace period.

According to the Department of Roads (DoR), it will be the first loan from Japan in Nepal’s road sector.

The DoR will appoint consultant for preparing the detailed project report (DPR)  once the loan agreement signed is approved.

As far as project preparedness is concerned, feasibility study and environment impact assessment have already been completed, according to the DoR.

Japanese State Minister for Foreign Affairs Nobuo Kishi, during his visit here in August for the celebrations of 60 years of Nepal-Japan diplomatic ties, had pledged Japanese assistance for the project. There is not much loan component in Japanese assistance to Nepal over the long history of Japanese cooperation. The Melamchi Drinking Water Project, Tanahu Hydro Project, post-quake reconstruction of rural housing and planned aid for tunnel roads are among the few projects where Japan has extended loans.