China has informed Nepal that the loan agreement for the proposed regional international airport project in Pokhara is likely to be concluded by November, a Finance Ministry official said.

At the request of Nepal government last August, China had agreed to provide nearly a third of the loans to finance the project at zero interest it needed to complete some due procedures.

Prem Upadhyay, under-secretary at the Finance Ministry, said the Chinese side had informed them that a proposal on providing interest-free loan had been sent to the Chinese Finance Ministry for approval. “The loan approval process is almost complete.”

The northern neighbour had also conveyed the message that the interest-free loans could be converted into grant in the future, according to the government officials.

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

The government had planned to start the loan negotiations on June 9, but they were postponed due to the April 25 earthquake. The Finance Ministry had formally requested the bank for a soft loan last November.

The credit request followed the Cabinet nod on October 27, 2014 to construct the much-delayed project with the Chinese funding. The airport project has been on hold 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, Pulchowk 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 its saturation level, the government has also been upgrading Gautam Buddha Airport in Bhairahawa to an international airport. The airport is expected to come online by December 2017.

The government has also started promoting the two new airports. The government had allowed UAE carriers to operate 70 flights per week to each airport during the ICAO Air Services Negotiation Event held Turkey’s Antalya two week ago.