Kathmandu, March 15

Nepal and China are likely to sign a loan agreement for development of a regional international airport in Pokhara during Prime Minister KP Sharma Oli's official visit to China beginning March 20.

China had earlier pledged to provide a soft loan through its Export Import (EXIM) Bank to build the airport in one of the largest tourist hubs in the country.

"Negotiations for the loan agreement are still going on and we hope they will conclude during PM Oli's visit to China. We then expect both the countries to sign the deal," a senior official of the Ministry of Finance (MoF) told The Himalayan Times.

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, which can only handle small aircraft.

The government had earlier written to the Chinese authorities, requesting that the interest rate on the credit be reduced.

China's EXIM Bank provides loan at annual interest rate of two per cent. On top of that, loan management fee and commitment fee will also be charged.

"We had requested that the rate be brought down to 1.5 per cent," the MoF official said. "We have also asked the Chinese government to provide a portion of loan on interest-free basis. But Chinese authorities have not responded."

Once these issues are settled, the government will hold negotiations on other issues, such as tenure of loan, debt servicing timeframe, grace period for loan repayment and loan release timeframe.

The government handed over the contract for construction of the regional international airport to China CAMC Engineering in May 2014. At that time, Ratish Chandra Lal Suman, the then director general of the Civil Aviation Authority of Nepal, and Luo Yan, chairman of CAMC Engineering, had signed the contract in Kathmandu.

The airport will be 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. The runway of the new airport will be around 2,500 metres long and 45 metres wide. This runway will be able to handle big aircraft, such as Boeing 757s and Airbus 320s.

The Chinese developer will also build air-traffic control tower, taxi way, hangar, apron, international and domestic terminals and cargo terminal.