Nepal’s anti-graft agency has filed a corruption case against 14 individuals, including former finance minister Gyanendra Bahadur Karki, over alleged irregularities in granting tax exemptions during the construction of the Pokhara International Airport.

The Commission for Investigation of Abuse of Authority (CIAA) on Thursday filed the case at the Special Court against ex-minister Karki, former finance secretary Shankar Prasad Adhikari, senior government officials and representatives of the Chinese contractor China CAMC Engineering Co Ltd, accusing them of causing a loss of Rs3.62 billion to the state by granting tax waivers in violation of the original procurement agreement.

The CIAA has alleged that the defendants colluded to provide unlawful tax exemptions to the Chinese construction company despite provisions in the original contract requiring the contractor itself to bear all applicable taxes, customs duties and fees.

Among those charged is Danduraj Ghimire, currently the principal secretary of Gandaki Province, who at the time served as a joint secretary at the Ministry of Culture, Tourism and Civil Aviation. Following the filing of the case, Ghimire has been automatically suspended from office under prevailing anti-corruption laws.

The CIAA has also named the Chinese contractor and two of its representatives as defendants, accusing them of intentionally benefiting from the allegedly unlawful tax waivers.

According to CIAA assistant spokesperson Ganesh Bahadur Adhikari, the case has been filed against former finance minister Karki; former finance secretary Shankar Prasad Adhikari; former tourism secretary Maheshwar Neupane; former finance ministry joint secretary Kewal Prasad Bhandari; former tourism ministry joint secretaries Suresh Acharya and Dandu Raj Ghimire; former director generals of the Civil Aviation Authority of Nepal Sanjeev Gautam and Pradeep Adhikari; former electronics engineer at the tourism ministry Yogesh Aryal; former finance ministry under-secretary Yubaraj Pandey; and section officer Urmila Bhandari.

The CIAA has also charged China CAMC Engineering chairman Wang Bo and project manager Yang Zhigang as accomplices in the corruption case.

This is the third corruption case linked to the Chinese-funded Pokhara airport project.

Earlier, on December 7, 2025, the CIAA had filed a separate corruption case against 55 individuals. Those named included five former ministers, including former finance minister Ram Sharan Mahat, nine former secretaries and a former registrar of the Supreme Court, accusing them of causing a loss of $74.34 million, by allegedly awarding the airport construction contract to the Chinese company at an inflated cost through collusion.

A second corruption case was filed on March 22, 2026, against 21 individuals, including then tourism secretary Kedar Bahadur Adhikari, then CAAN directors general Sanjeev Gautam, Rajan Pokharel and Pradeep Adhikari, as well as representatives of the Chinese contractor, over alleged irregularities in appointing a consultant for the airport project.

In that case, the CIAA sought recovery of Rs461.58 million, alleging corruption in consultancy fees and accusing officials of bypassing the contract’s provisions requiring the appointment of a consultant for $2.8 million. Investigators also alleged that project costs were artificially inflated to Rs503.44 million, causing duplicate and unnecessary expenditure from CAAN funds.

The latest case focuses specifically on the alleged unlawful tax exemptions granted to the contractor.

With the filing of three major corruption cases, the Pokhara airport project has become one of the most heavily litigated infrastructure projects in Nepal’s history.

A CIAA official involved in the investigation said further inquiries into additional irregularities connected to the airport project are still underway.

According to the charge sheet filed at the Special Court, the minister, bureaucrats and the contractor allegedly colluded to misuse loan funds obtained from the Chinese government under the pretext of tax exemptions.

The CIAA said that the procurement agreement signed between CAAN and the contractor clearly required the company to bear all taxes, customs duties and other fees within the contract amount itself. Despite this, officials later introduced provisions through a separate ‘implementation agreement’ allowing the contractor to claim exemptions from those payments.

“The implementation agreement was concluded with conditions contrary to the provisions of the original contract, enabling the contractor to obtain exemptions on taxes, customs duties and other fees,” the CIAA charge sheet states.

“It has been established that, in violation of the original contract provisions, an ‘implementation agreement’ was executed to grant the contractor exemptions on taxes, duties, and other fees. On this basis, the contractor received payments inclusive of such taxes but failed to deposit them into the state treasury. By obtaining these exemptions, the contractor was granted a double benefit, resulting in the loss and misuse of Rs3.62 billion from public funds acquired by the government as loan assistance.”

The anti-graft body has sought fines equivalent to the alleged loss amount, recovery of embezzled funds and prison sentences against former minister Karki.

Similar punishment has been sought against then finance secretary Adhikari and then tourism secretary Neupane, as well as then joint secretaries Bhandari, Acharya and Ghimire, and then CAAN director general Gautam.

The CIAA has sought penalties, recovery of losses and jail terms against the Chinese company representatives, while demanding fines and punishment against the remaining accused in accordance with their alleged roles.

Nepal’s parliamentary Public Accounts Committee had earlier instructed the CIAA to investigate and prosecute those involved in the tax waiver controversy.

A subcommittee led by then lawmaker Rajendra Lingden had conducted an inquiry into the issue and submitted a report recommending action against those responsible. Then committee chair Rishikesh Pokharel formally forwarded the report to the CIAA on May 23, 2025.

The Office of the Auditor General, in its 60th annual report, had also questioned the legality of the tax waivers, stating that the ‘implementation agreement’ had been used to grant exemptions contrary to the original contract and thereby caused financial loss involving loan funds.

During questioning by the CIAA, former tourism secretary Maheshwar Neupane distanced himself from responsibility, arguing that the matter fell under the jurisdiction of the finance ministry.

“As matters related to foreign loans fall under the authority of the finance ministry and agreements are also concluded there, the legal basis of the arrangement should be known to the finance ministry,” Neupane said in his statement.

Former finance secretary Shankar Prasad Adhikari, meanwhile, argued that the tax exemptions were proposed in good faith.

“It has been an established policy of the government to provide tax exemptions on goods imported for projects operated under foreign assistance,” Adhikari said in his statement to investigators.

“In this case, too, the issue of tax exemption appears to have been included under the same policy. The implementation agreement was approved after receiving a positive response from the tourism ministry.”

He further argued that the finance ministry had not been informed that the original procurement contract prohibited tax waivers.

“If the original contract had prohibited tax exemption, the Civil Aviation Authority should have informed the finance ministry through the tourism ministry, which does not appear to have happened. I decided in good faith,” he said.

Former finance minister Karki also denied wrongdoing, arguing that all major agreements related to the airport had already been concluded before he assumed office.

“The construction contract, loan agreement and subsidiary loan agreements had already been completed before I became finance minister,” Karki said in his statement to the anti-graft body.

“The project implementation agreement was part of the regular administrative process. I was told that such agreements were routinely made in projects supported by the Chinese government and under the prevailing act and development assistance policy. Based on those recommendations, I approved the proposal in good faith.”

Allegations of collusion and irregularities surrounding the Pokhara airport project date back to the very beginning of the procurement process.

Plans for a new international airport in Pokhara were initiated in 2008 as part of efforts to reduce pressure on the Tribhuvan International Airport in Kathmandu.

The Civil Aviation Authority had initially commissioned a feasibility study through Joshi Associates, and on September 23, 2011, the authority’s board approved a cost estimate of $145 million excluding VAT.

The Chinese government later expressed interest in constructing the airport under the Engineering, Procurement and Construction (EPC) model using concessional loans.

China CAMC Engineering submitted a proposal on December 12, 2011, offering to build the airport directly at a proposed cost of $286.52 million, excluding taxes.

The proposal was advanced by the aviation authority’s board under then tourism minister Post Bahadur Bogati, with then tourism secretary Sushil Ghimire endorsing the process.

The decision to award the project directly to a Chinese company without open competition drew criticism. The authority subsequently formed a cost review committee led by Manoj Karki, which revised the estimate to $169.697 million, including contingencies and VAT. The revised estimate also became the subject of allegations of collusion.

The authority approved the revised estimate and invited bids. Ten Chinese companies, including China CAMC Engineering, submitted proposals. However, all were initially disqualified during technical evaluation because none met the requirement of having completed airport projects worth at least $120 million.

Despite this, on July 15, 2012, the authority’s board decided to open the financial proposals, a move later criticised as being contrary to public procurement law.

Although none of the bidders reportedly met the technical experience criteria, the process moved ahead after the Chinese Embassy in Nepal wrote to the authority on July 10, 2012, stating that the three companies, including China CAMC, were qualified, experienced and capable of completing an international airport project.

Subsequent committees and negotiations repeatedly revised the estimated project cost upward.

On August 24, 2012, China CAMC informed the authority that project costs could be verified later after completion of detailed engineering and design work. The Public Procurement Monitoring Office later advised that negotiations conducted in such a manner would violate procurement laws.

Complaints were also filed with the CIAA, which instructed authorities on August 28, 2012, not to take unlawful decisions. Despite the warning, the process continued.

On February 15, 2013, the Cabinet granted in-principle approval for the airport project to proceed within the original estimated cost of around $145 million. However, the authority later formed another committee led by deputy director general Suman Kumar Shrestha, which revised the estimate to $264 million.

The CIAA investigation has alleged collusion in that revision as well.

The revised estimate was approved by a board meeting of the aviation authority chaired by then director general Ratish Chandra Lal Suman.

After Khilraj Regmi became head of the interim election government, Ram Kumar Shrestha assumed charge as tourism minister. The authority then formed another task force led by former Supreme Court registrar Ram Krishna Timsina, with experts Purushottam Dangal and Binodanand Chaudhary as members.

The task force recommended proceeding under the EPC model within a ceiling of $215.965 million. It also noted that the original $145 million estimate had not been prepared in accordance with procurement procedures.

Based on that recommendation, the authority’s board decided on November 15, 2013, to proceed with the project at the revised estimate of $215.965 million and sought Cabinet approval.

The Cabinet endorsed the proposal on December 26, 2013, allowing the tender process to move forward.

Fresh complaints over inflated costs were later lodged with the CIAA, but the anti-graft agency shelved the complaint in March 2014.

The aviation authority subsequently finalised the contract draft and signed the agreement with China CAMC Engineering on May 22, 2014.

The Institute of Engineering at Pulchowk later conducted another study, concluding that the airport could cost as much as $230.065 million.

At the time, Ram Sharan Mahat was finance minister, Deepak Amatya was tourism minister, Suman Prasad Sharma was finance secretary, Bhesh Raj Sharma was law secretary, and Suresh Man Shrestha was tourism secretary.

A meeting chaired by Mahat at the finance ministry on October 20, 2014, agreed to move forward with a proposal for a Chinese concessional loan arrangement.

The Cabinet later approved the arrangement on October 27, 2014, authorising the finance ministry to arrange funding for the airport construction under the EPC model using Chinese concessional loans.

The Cabinet decision did not include any provision for tax exemptions.

Nepal and China formally signed the loan agreement on March 21, 2016, based on the revised project cost estimate.

By February 25, 2018, most major agreements and procedural approvals related to the airport had already been completed.

The controversy over tax waivers emerged later during implementation, eventually leading to a series of CIAA investigations and corruption cases now before the Special Court.

Although the airport was inaugurated on January 1, 2023, it has struggled to attract regular international commercial flights.