Nepal on Thursday signed a memorandum of understanding with India in New Delhi to prepare a detailed project report for a proposed $3.15 billion railway linking Kathmandu with the Indian border town of Raxaul in the south.

The broad-gauge line will give the Nepali capital a direct connection with the Indian railway network, enabling non-stop train travel to all Indian cities.

On March 9, the Nepali Cabinet had given an in-principle approval to the Ministry of Physical Infrastructure and Transport to sign a memorandum of understanding with India to create a plan.

The train link to Raxaul, which will be 136 km to 198 km long, is seen as New Delhi’s attempt to counter Chinese influence in Nepal.

Deepak Kumar Bhattarai, director general of Nepal's Department of Railways, and Anurag Bhushan, joint secretary at the Development Partnership Administration under the Indian Ministry of External Affairs, signed the memorandum of understanding on behalf of their respective governments.

According to the understanding, India will finish the detailed project report within 18 months of the commencement of the agreement; and Nepal will facilitate the process. The Indian government will bear the cost of preparing it.

“The signing of the agreement is an important development,” said Aman Chitrakar, spokesperson for the Railways Department, who is among the visiting team in New Delhi.

He said that the detailed project report would study various specifications from contract drawings to detailed technical feasibility and financial feasibility to the execution of the project.

Konkan Railways Corporation has already prepared a pre-feasibility study of the proposed broad-gauge railway project. Indian broad-gauge tracks have a width of 1,676 mm.

After China moved to help Nepal build a Rasuwagadhi-Kathmandu railway in a bid to enhance cross-border connectivity, India responded with a proposal for the Kathmandu-Raxaul railway project, analysts said.

Once this railway is constructed, goods can be transported directly to Kathmandu from India and third countries.

Currently, shipments originating overseas are brought to the inland container depot in Birgunj by rail and transferred to Kathmandu and other locations by road.

According to the Department of Railway, the Chinese side has also been working on a detailed feasibility study for the proposed Rasuwagadhi-Kathmandu railway remotely due to the coronavirus pandemic.

After the Indian blockade in 2015-16, former Prime Minister KP Sharma Oli had made an attempt to improve connectivity with China.

On a visit to China in March 2016 during Oli's first stint as prime minister, Nepal had requested the northern neighbour to provide financial and technical support to prepare a feasibility study and detailed project report for the Rasuwagadhi-Kathmandu and Kathmandu-Pokhara-Lumbini railway projects.

When Chinese President Xi Jinping visited Nepal in October 2019, China had agreed to prepare a detailed project report for the Rasuwagadhi railway.

With China prioritising connectivity with Nepal under its Belt and Road Initiative, India also initiated a number of connectivity projects like railways, waterways and roads and proposed to build the Kathmandu-Raxaul railway.

During Oli’s state visit to India in April 2018, the two neighbours had agreed to construct a new electrified rail line with Indian financial support connecting Raxaul and Kathmandu.

As per the joint statement issued at that time, the objective of constructing the railway is to expand connectivity to enhance people-to-people linkages and promote economic growth and development.

In August 2018, the two sides exchanged a memorandum of understanding to carry out a preliminary engineering-cum-traffic survey of the broad-gauge line. India had designated Konkan Railway Corporation to undertake the study. The railway company has completed a preliminary survey.

As per the survey report, construction of the proposed railway will need an investment of $2.66 to $3.15 billion, in addition to land acquisition, taxes on imports of various technical and other materials.

The Indian side has proposed to build four lines to connect Raxaul with Kathmandu. The construction is expected to take five years after clearance of the land from the Nepal side.