The Finance Ministry has revised its earlier position on the proposed regional international airport in Pokhara after initially expressing reservations due to its “unrealistic cost”.
Ministry officials said that the airport plan is now back on track. “Everything is moving in a positive direction as the Finance Ministry has been convinced by the written explanation provided by the Tourism Ministry regarding the cost of the project,” said a ministry official.
Last June, the Tourism Ministry had been asked to explain the project’s cost after it approached the Finance Ministry to arrange a soft loan of $215.96 million from China Exim Bank to build the long-planned regional international airport at Chinnedanda, Pokhara. The proposed site is 3km to the east of the existing domestic airport.
The Civil Aviation Authority of Nepal (Caan) had sent a loan request to the Tourism Ministry immediately after the contract for the airport was awarded to China CAMC Engineering Co on May 22.
Subsequently, Caan hired consultants from Pulchok Engineering College to conduct a detailed technical study of the project cost. The review concluded that the project cost would exceed the $ 215.96 million price tag quoted by the government’s three-member independent panel. “There are certain legal issues now. And as soon as they are settled, we will send a loan request letter to China Exim Bank,” the official said.
Earlier, the government had planned to borrow $145 million from the bank to build the airport. However, the loan amount was revised in line with the recent contract agreement signed between Caan and China CAMC.
Speaking in Pokhara last Saturday, Finance Minister Ram Sharan Mahat said the airport construction work would start this year and that the government was making efforts to make the project transparent by fulfilling all the processes.
“The airport is important not only for the people of Pokhara; it is also a national pride project,” he told the Pokhara Chamber of Commerce and Industry.
On April 7, a Caan board meeting chaired by the then tourism minister Bhim Acharya had approved the project under the revised cost of $ 215.96 million. 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 is 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.
Things became more complicated after China Airport Construction Company, a consultant appointed by China CAMC, submitted another study report to Caan quoting a price of $ 264 million. Adding 16 percent price escalation and 13 percent VAT, the estimated outlay would come to around $ 300 million, nearly equal to the original cost quoted by China CAMC.
Another three-member independent cost evaluation panel estimated a price of $ 215.96 million. The ministry then presented the proposal with the latest estimated cost to the Cabinet, but the Khil Raj Regmi-led government put the project on the backburner. The project was revived by Acharya under the Sushil Koirala-led government.
In 1975, the government had acquired more than 3,106 ropanis of land to build the airport. It has earmarked Rs 1 billion in this fiscal year’s budget for additional land acquisition after a fresh study said that another 500 ropanis would be required for the project.
As per the feasibility report, the airport will accommodate medium category jets like the Boeing 757 and Airbus 320.