International Airport in Pokhara: Finance Ministry confirms $216 million soft loan for project
By Sangam Prasain, Bhim Ghimire
19 December 2016

KATHMANDU (The Kathmandu Post/ANN) - The official sending of an approval letter by the Finance Ministry to the lender on Friday signals that the agreement for $215.96 million worth of soft loan inked with China in May for building a new airport in Pokhara has come into effect.

The $215.96 million soft loan pact 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 an 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 kilometres 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 the loan was being delayed due to procedural issues.  

The soft loan pact had been signed during then Prime Minister KP Sharma Oli’s visit to Beijing in March. According to the agreement, the government will receive the loan from China EXIM Bank, 25 per cent of which will be interest-free. The interest on the rest of the loan has been fixed at 2 per cent 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 a loan to Caan at 5 per cent interest per annum. The government will bear the foreign exchange risk—a potential risk that may arise from a fluctuation in the foreign exchange rates.

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

Gautam said that China CAMC Engineering, which had 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 noted.

“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 the soil filling works at the proposed runway as soon as possible,” Gautam remarked.  

Meanwhile, the acquisition of an additional plot of land to establish a buffer zone around the airport is also being considered for the project.

Pradeep Adhikari, the project's chief, said that they have begun an initial survey to acquire 107 ropanis (Nepalese unit of land measurement) 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.  

According to the feasibility report, the airport will have a 2,500x45-metre runway. It will accommodate medium-category jets, such as 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, such as 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 Feb 9, 2012.

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