Money

Stalled Pokhara International Airport Project back on track

- SANGAM PRASAIN, Kathmandu

May 6, 2017-The international airport project in Pokhara is back on track after stalling for a year as issues over opening an escrow account have been settled.

The government signed a $215.96 million soft loan agreement with China EXIM Bank in March 2016 for the construction of the new airport in Pokhara.

Construction was delayed after China EXIM Bank set a condition that a joint escrow account should be set up into which the Civil Aviation Authority of Nepal (Caan), the project executing agency, should deposit the income generated from all its airports.

Caan refused to do so which delayed the release of the project funds, and construction of the airport stalled. “Now the issue has been settled,” said Pradip Adhikari, chief of the airport project. “On April 21, the bank issued a letter stating that its earlier condition regarding the escrow account had been amended,” he said.

As per the amended provision, only revenues generated by Pokhara International Airport will be put into the account, he said. “We have been given a May 12 deadline to send our reply, and we will be doing so in a few days,” he added,

After the escrow account agreement is signed, the loan will become effective and the Nepal government will be able to use the loan. Adhikari said that the groundwork for the project would begin soon. Currently, the project is preparing the design of the airport.  The proposed airport in the tourist and commercial hub of Pokhara lies at Chinnedanda, 3 km to the east of the existing domestic airport. The soft loan pact was signed during the then prime minister KP Sharma Oli’s visit to Beijing in March last year.

As per the agreement, the government will receive the loan from China EXIM Bank, 25 percent of which will be interest-free.

The interest on the rest of the loan has been fixed at 2 percent per annum. The loan repayment period has been fixed at 20 years, including a grace period of seven years when no interest will be charged. The Ministry of Finance, which signed the credit agreement with the Chinese bank, has agreed to provide the loan to Caan at 5 percent interest per annum. The government will bear the foreign exchange risk, a potential risk that may arise from fluctuations in foreign exchange rates.

China CAMC Engineering, which won the construction contract in May 2014, is expected to finalize the airport’s design by May-end.

As per the feasibility report, the airport’s runway will be 2,500 metres long and 45 metres wide. It will accommodate medium category jets like the Boeing 757 and the Airbus 320.

The airport will be built under the engineering procurement and construction (EPC) model. Under the EPC contract, a single contractor takes responsibility for all components like design, engineering, construction and procurement. The contract binds the contractor to deliver the project at the stipulated time and at the predetermined price regardless of any possible cost overruns.

The government plans to complete the project by July 2020. In 1975, the government acquired 3,106 ropanis of land for the project. Caan invited bids for the project on February 9, 2012.

Published: 06-05-2017 09:02

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