The second-phase expansion of the Ring Road remains stalled as the Nepal government has yet to approve tax exemptions, even though the Chinese side has finalised the design.

Initially, delays came from the Chinese side, but now the holdup is due to Nepal’s slow policy-level decision. The tax exemption file has been sent to the Finance Ministry, said Sushil Babu Dhakal, chief of the Development Assistance Coordination and Quality Division under the Ministry of Physical Infrastructure and Transport. The implementation agreement defines the roles of each side, after which China will select a contractor for construction.

Dhakal said the Chinese contractor will not pay any taxes during construction. Once the agreement is finalised, the contractor will be sent to Nepal. The file had initially received Cabinet approval through the Finance Ministry but was returned for clarification on tax exemptions. “Once approved, all construction equipment and activities by the Chinese contractor will be tax-free,” he said.

Deputy Director General of the Department of Roads Arjun Prasad Aryal said work will advance once the Finance Ministry makes a decision. “The design is ready. After approval, it will be presented, corrected if needed, and the contractor selection process will start,” he said.

The project, funded by Chinese aid, will be executed alongside the Syafrubesi–Rasuwagadhi road upgrade. Under foreign aid rules, grant funds are tax-exempt, prompting China to request tax exemptions for imported materials and equipment. The same arrangement was used for the Koteshwar–Kalanki section.

The Chinese survey team visited Nepal on April 19 last year, covering 8.2 km. Expansion will reach near the Basundhara culvert; the remaining section will be done by Nepal. The design includes a concrete bridge at Dhungedhara and three accessible pedestrian overpasses at Sitapaila, Balaju–Machhapokhari, and Samakhusi–Basundhara Police Post. Streetlights from Kalanki to Basundhara Chowk will also be installed by the Chinese contractor.

Despite over seven years of agreement, the project has yet to gain momentum.