The government will sign a $215.96 million loan deal with China EXIM Bank to build a new international airport in Pokhara during Prime Minister KP Sharma Oli’s visit to Beijing that begins on Sunday.

A Cabinet meeting on Thursday cleared the way for the Finance Ministry to conclude the deal, almost two years after the Civil Aviation Authority of Nepal (Caan) awarded the construction contract to China CAMC Engineering.

Deputy Prime Minister and Minister for Foreign Affairs Kamal Thapa said the loan agreement has been included in the agendas of PM Oli’s visit to China.

The government has already concluded loan negotiations with the bank. The bank has also agreed provide 25 percent of the loan without interest, Finance Ministry officials said. The government will have to pay interest on rest of the loan amount at 2 percent per annum. The loan repayment period has been set 20 years, including seven-year grace period when no interest will be charged.

The proposed airport site at Chinnedanda lies 3km east of Pokhara domestic airport. More than 80 percent of landowners whose properties have been acquired have received compensation. In 1975, the government had taken over 3,106 ropanies of land for the project. It acquired an 629 ropanies after a new study showed the proposed airport would require more space.

In the first week of November 2014, the Finance Ministry had formally requested China EXIM Bank for a soft loan of $215.96 million to build the international airport. The credit request followed the Cabinet’s go-ahead on October 27, 2014, to construct the project with Chinese funding.

The Finance Ministry had initially expressed reservations about the project’s cost and termed it “unrealistic”. However, it was convinced after the Tourism Ministry formed a high-level panel from the Institute of Engineering, Pulchowk, which showed the project would cost over $216 million.

On May 22, 2014, the Civil Aviation Authority of Nepal (Caan) awarded the contract to China CAMC Engineering. The airport will be built under the engineering procurement and construction (EPC) model. The EPC contract binds the contractor to deliver the project at the stipulated time and at the predetermined price regardless of any possible cost overruns.

Caan had invited bids for the project on February 9, 2012. As per the feasibility report, the airport, which will spread over 200 hectares, will have a 2,500-metre long and 45-metre wide runway. It will accommodate medium category jets like the Boeing 757 and the Airbus 320. The airport project has been in the works for more than 40 years.