Finance ministry fixes 5pc interest on credit to build Pokhara airport

Kathmandu, May 20

The Civil Aviation Authority of Nepal (CAAN) will soon be getting government credit to build the regional international airport in the western city of Pokhara at an annual interest of five per cent.

An agreement to this extent would be signed between the Ministry of Finance (MoF) and the CAAN, the aviation sector regulatory body, soon, Krishna Prasad Devkota, head of the Economic Policy Analysis Division at the MoF told The Himalayan Times.

This interest rate is practically the lowest so far being offered by the MoF to CAAN.

Although the MoF had previously extended credit to CAAN at five per cent interest to execute Tribhuvan International Airport expansion project, it, at that time, had asked the aviation sector regulator to bear the foreign exchange risk.

“The difference this time is that the MoF has agreed to bear the foreign exchange risk itself,” a high-ranking CAAN official told THT on condition of anonymity, adding, “This technically means the interest levied by the government on loan being issued for development of the new Pokhara airport is the cheapest so far.”

The MoF generally extends credit at an interest of seven per cent per annum to CAAN to develop infrastructure projects.

The MoF is extending credit to CAAN from the soft loan extended by the Chinese government to Nepal.

During Prime Minister KP Sharma Oli’s official visit to Beijing in March, the Chinese government had agreed to provide 1.37 billion renminbi (approximately Rs 22.20 billion) in soft loan to the government of Nepal to build the regional international airport.

Of the total credit amount, RMB1.02 billion is being extended by Export-Import (EXIM) Bank of China at an annual interest rate of two per cent. The remaining portion of the loan, or RMB355 million, is being provided without charging any interest.

Nepal needs around $216 million (1.54 billion yuan) to build the new airport at Chinnedanda, located at a distance of around three km from the existing airport in Pokhara, which can only handle small aircraft.

Once the new airport is built, it will have a runway of around 2,500 metres long and 45 metres wide, and can handle big aircraft, such as Boeing 757s and Airbus 320s.

“We are planning to begin initial construction works, such as levelling of the ground where the runway will be built, soon after the monsoon is over,” the CAAN official said. “By that time we also expect to approve the design of the airport.”

The design of the airport has already been prepared by the China CAMC Engineering, the developer of the regional international airport selected by the government through competitive bidding in May 2014.

“We will evaluate the design once we sign the subsidiary loan agreement with the MoF,” the official said.

The airport is being built under engineering, procurement and construction model. Under this model, the developer will have to bear the expenses in the case of cost overrun.

The government has already acquired 3,106 ropanis of land to build the new airport.