Nepal requests China to convert loan for Pokhara International Airport into grant

KATHMANDU: The Government of Nepal has formally requested the Chinese government to convert the loan taken for the construction of the Pokhara Regional International Airport into a grant. The Ministry of Finance sent a letter to the Chinese authorities, urging them to consider this conversion.

During a program organized at the Ministry of Finance on Thursday, Dhaniram Sharma, Chief of the International Economic Cooperation Coordination Division, handed over the letter to Yang Weikun, Vice President of the China International Development Cooperation Agency.

Before the handover, Deputy Prime Minister and Finance Minister Bishnu Prasad Paudel emphasized that China has been a good neighbor to Nepal and, considering Nepal’s current economic situation, requested the Chinese government to convert the loan into a grant. Minister Paudel expressed confidence that China would positively respond to Nepal’s request. The event was also attended by Finance Secretary Ram Prasad Ghimire and Chinese Ambassador to Nepal Chen Song, among others.

Nepal had entered into a loan agreement with China’s Exim Bank to finance the Pokhara Regional International Airport, securing approximately NPR 25.88 billion (1,338.74 million Chinese Yuan) based on the current exchange rate. The loan agreement was signed on March 22, 2016, and construction began on January 10, 2017. The airport was officially inaugurated on January 1, 2023.

The program also saw the signing of four separate agreements for cooperation, including the construction of an 8.2 km road from Kalanki to Basundhara-Maharajgunj along the Ring Road in Kathmandu, upgrading the Hilsa-Simikot road section to two lanes, building an ICP and ICD at the Korala border in Mustang, and conducting a feasibility study for the repair and improvement of the Arniko Highway and landslide control.

Finance Secretary Ghimire signed the agreements on behalf of Nepal, while Vice President Yang Weikun signed on behalf of China. Minister Paudel also requested China’s assistance in infrastructure development, including the construction of infrastructure for Bir Hospital and the Madan Bhandari University of Science and Technology. Vice President Yang assured that China would study these requests and move forward with the necessary processes.

The construction of the Pokhara International Airport began in the fiscal year 2017/18 with an initial cost estimate of NPR 22 billion, and it was scheduled for completion in fiscal year 2020/21. However, the project was delayed by two years, with a final completion timeline set for fiscal year 2022/23, and the cost escalated to NPR 25.34 billion. Despite being constructed with Chinese loan assistance, the airport has not yet become fully operational, resulting in financial losses.

The Office of the Auditor General has highlighted operational issues, noting that water from nearby areas during the monsoon season, including from Manipal, Seti River, and Kahu Khola, has been entering the airport premises, causing operational disruptions. The government has been directed to coordinate with various airlines and countries to ensure the airport becomes fully operational.

Similarly, the Gautam Buddha International Airport, whose construction began in January 2015 with a completion target of July 2017, saw its deadline extended multiple times, with the airport only becoming operational in May 2022. Despite the substantial investment, the airport has not yet seen regular international flights.

The Office of the Auditor General has directed the government to coordinate with airlines and other countries to increase international flights from the airport. The Public Accounts Committee of the House of Representatives had formed a parliamentary subcommittee last June to investigate financial irregularities related to the airport’s construction.

A 12-member subcommittee led by Rastriya Prajatantra Party (RPP) President and MP Rajendra Prasad Lingden has been formed to investigate the Pokhara International Airport, while an 8-member subcommittee led by UML Secretary and MP Yogesh Bhattarai has been formed to investigate Gautam Buddha International Airport.

Although both subcommittees were initially given a month to submit their reports, the deadline has been extended due to incomplete studies. The subcommittee led by Lingden includes members such as Arjun Narasingh KC, Gokul Prasad Baskota, Janardan Sharma, Tara Lama Tamang, Tejulal Chaudhary, Deepak Giri, Dev Prasad Timilsina, Prem Bahadur Ale, Ram Krishna Yadav, Rukmini Rana Barailee, and Lekhnath Dahal.

Similarly, the subcommittee investigating Gautam Buddha International Airport includes Achyut Prasad Mainali, Amaresh Kumar Singh, Bikram Pandey, Manju Khan, Manish Jha, Shyam Kumar Ghimire, and Saraj Ahmed Farooqi.

The Public Accounts Committee has mandated these subcommittees to investigate and report on the entire process, from the initial demand for the airports to the current status, including master planning, costs, contracts, and construction.