China is willing to provide nearly one-third of the loans requested to finance the construction of the new Pokhara airport at zero interest, the Finance Ministry said.

The China Exim Bank has agreed to provide a soft loan of $215.96 million to the government to build the regional international airport at Chinnedanda. The proposed site lies 3 km to the east of the existing domestic airport.

Madhu Kumar Marasini, chief of the international economic cooperation coordination division of the Finance Ministry, said that China had expressed its willingness to grant 25-30 percent of the total loans as interest-free loans.

The northern neighbour has conveyed the message that the interest-free loans could be converted into grant in the future, multiple government sources said.

According to Marasini, a China Exim Bank team is scheduled to arrive in Nepal soon to conduct loan negotiations and sign an agreement. Although the exact date for the talks has not been fixed, government sources said they could take place within two weeks.  

The government had planned to start the loan negotiations on June 9, but they were postponed due to the April 25 earthquake.

Last November, the Finance Ministry had formally requested the bank for a soft loan. The credit request followed the Cabinet’s go-ahead on October 27, 2014 to construct the much-delayed project with Chinese funding. The airport project has been in the works for 40 years.

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

On May 22, the Civil Aviation Authority of Nepal (Caan) had awarded the construction 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 at the predetermined price regardless of any possible cost overruns. Caan had invited bids for the project on February 9, 2012. The airport project has been on hold since July 2012 after the lowest bidder China CAMC quoted a price of $305 million, which was 85 percent higher than the government’s estimate. The government had expected the project to cost around $166 million.

Subsequently, in January 2013, China CAMC wrote to the Tourism Ministry expressing its willingness to build the project at the government-estimated cost. In 1975, the government had acquired more than 3,106 ropanis of land for the planned airport. As per the feasibility report, the airport will accommodate medium category jets like the Boeing 757 and the Airbus 320.

As Tribhuvan International Airport in Kathmandu, the country’s sole international airport, has reached saturation level, the government has been upgrading Gautam Buddha Airport in Bhairahawa to an international airport.

On January 15, the long-planned upgradation at Gautam Buddha Airport was formally inaugurated by Prime Minister Sushil Koirala. The proposed airport is expected to come online by December 2017.