Kathmandu: The Japan International Cooperation Agency (JICA) has signed an agreement to provide an additional soft loan of 5.7 billion Japanese Yen, equivalent to approximately Rs 5.26 billion, for the completion of the Nagdhunga Tunnel Project.
The exchange of notes was signed by Nepal’s Finance Secretary Dr Ghanashyam Upadhyay and Japanese Ambassador Toru Maeda. Concurrently, the specific loan agreement was finalized by Dr Dhani Ram Sharma, Chief of the International Economic Relations Coordination Division at the Ministry of Finance, and Matsuzaki Mizuki, the Chief Representative of JICA Nepal.
The financial terms of this supplemental package include an annual interest rate of 1.15 percent for the construction component and 0.55 percent for consulting services. The agreement stipulates a 20-year repayment period, which includes a 10-year grace period during which only interest is paid. This funding follows an initial concessionary loan of 16.636 billion Japanese Yen signed between the two governments in December 2016, which served as the primary financial foundation for the project.
According to the Ministry of Finance, several unforeseen factors necessitated this additional budget, including price adjustments, modifications in the quantity of tunnel work, and design changes. Furthermore, the project faced delays and cost escalations due to the COVID-19 pandemic, local obstructions, and significant fluctuations in currency exchange rates. Despite these hurdles, the project remains a strategic priority aimed at alleviating chronic traffic congestion at the Nagdhunga pass and enhancing the connection between the capital city and major regional hubs across Nepal.
The project has now reached its final stages, with physical progress reported at approximately 99 percent. The 2.68-kilometre-long tunnel is slated to be formally inaugurated and opened for traffic in the first week of Shrawan (mid-July). Senior Divisional Engineer Sanjay Panthi stated that the tunnel is essentially ready for operation, with only minor landslide control measures currently underway. While about 30 percent of these landslide stabilization works are still pending due to land acquisition disputes with residents, officials have assured that this remaining work will not interfere with the tunnel’s opening.
To ensure professional management of the facility, a joint venture between Nepali and Chinese firms, Yusin-ART JV, has already been selected as the service provider for the next five years. The joint venture secured the contract with a bid of 1.104 billion NPR following a global tender that attracted ten domestic and international companies. This team will be responsible for the day-to-day operations and maintenance of the tunnel, marking a significant milestone in Nepal’s infrastructure development as it prepares to launch its first modern road tunnel.
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