The $215.96 million soft loan signed with China in March for the construction of a new international airport in Pokhara has come into effect after the Finance Ministry officially sent a “letter of approval” to the lender on Friday. The approval letter is the official confirmation from the borrower to obtain the soft loan. 

With this, the government can tap the credit to fund the airport project, said Sanjiv Gautam, director general of the Civil Aviation Authority of Nepal (Caan), the project executing agency. The proposed airport in the tourist and commercial hub lies at Chinnedanda—3 km to the east of Pokhara’s existing domestic airport.

Recently, locals of Pokhara had expressed deep concerns over Tourism Minister Jeevan Bahadur Shahi’s statement that the release of loan was being delayed due to procedural issues.  

The soft loan pact was signed during then Prime Minister KP Sharma Oli’s visit to Beijing in March. 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 had 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 loan to Caan at 5 percent interest per annum. The government will bear the foreign exchange risk—a potential risk that may arise from fluctuation in foreign exchange rates.

Caan will repay the loan from the income generated by the airport.

According to Gautam, China CAMC Engineering, which won the construction contract in May 2014, will finalise the airport’s design in May 2017. The civil works will begin from July next year, Gautam said.

“However, we are waiting for the Chinese contractor to submit the preliminary design of the airport that will ascertain the elevation of the runway,” added Gautam. “If the elevation is ascertained, we can complete soil filling works at the proposed runway as soon as possible.”   

Meanwhile, the project is considering on acquiring an additional plot of land to establish a buffer zone around the airport.

Pradeep Adhikari, chief of the project, said that they have started an initial survey to acquire 107 ropanis of land to establish a 10-metre wide buffer zone, or Ring Road outside the airport. “The move is aimed at securing the airport as per the requirement of the International Civil Aviation Organization,” he said. 

As per the feasibility report, the airport will have a 2,500x45-metres runway. It will accommodate medium category jets like Boeing 757 and Airbus 320.

The airport will be built under the engineering procurement and construction (EPC) model. Under an 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 had taken over 3,106 ropanis of land for the project. Caan had invited bids for the project on February 9, 2012.

Int’l Airport in Pokhara

-    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 is fixed at 20 years, including a grace period of          seven years