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Chinese-Built Pokhara Airport Fails To Take Off

By LokMarg 12th May 2023

Under China’s Belt and Road Initiative, Beijing built the Pokhara international airport in Nepal in January but since it came into operation, there are no signs of the airport receiving any international flights, The Annapurna Express reported.

According to the airport authorities, although the talks are ongoing with China, India and other countries, the chances of international airlines making flights to and from Pokhara airport in the near future appear slim. Without international flights, the airport cannot make sufficient income to sustain itself.
According to officials in the Civil Aviation Authority of Nepal (CAAN), the airport should conduct at least 100 daily domestic flights and 50 weekly international flights in order to sustain its operations.

Earlier, when the Pokhara International Airport was inaugurated, it invited a short-lived criticism after China placed it under the BRI, even though the agreement for the airport project was finalised before Nepal became part of the Belt and Road Initiative.

Talking about the loan, Vijay Kant Karna, executive chairperson at the Centre for Social Inclusion and Federalism (CESIF), said, “This is a 100 per cent loan, not aid taken from the Chinese bank, so it is inappropriate to publicize it as aid from China.”

“The only concession is that we do not have to pay the interest of 25 per cent loans, so if we say it is a loan it gives another message to the public,” he added.

Earlier, in 2014, Luo Yan, chairman of the China CAMC Engineering Co. Ltd., and Ratish Chandra Lal Suman, director general of CAAN, had signed a contract worth USD 215.96m for the construction of the airport.

On 21 March 2016, China Exim Bank and the Nepalese government signed a government concessional loan (GCL) agreement worth RMB 1.37bn for the Pokhara International Regional Airport Construction Project.

According to The Annapurna Express citing AidData, a research lab based in Washington DC, 25 per cent of the loan value (RMB 355.9m) was provided without interest and with a maturity period of 20 years and a grace period of 7 years.

The remaining 75 per cent of the loan value (RMB 1.02bn) was provided at a 2 per cent interest rate, a 20-year maturity period and a 7-year grace period.

The AidData report further says that Nepal used the proceeds from this loan agreement to on-lend to CAAN at a five per cent interest rate (with a 20-year maturity period and a 7-year grace period) through a Subsidiary Loan Agreement (SLA) that was finalized on 5 June 2016.

The airport construction project was delayed after China Exim Bank set a condition that a joint escrow account should be set up into which CAAN-the project executing agency-would have to deposit the income generated from all its airports, according to the report.

CAAN refused to do so which delayed the release of the project’s funds and construction of the airport stalled. However, CAAN and China Exim Bank eventually agreed in 2017 to only deposit revenues generated by Pokharan Int Regional Airport into escrow accounts, reported The Annapurna Express.

The airport has to pay USD 3.2m alone in annual interest. Officials say the airport must have an income of at least Rs 1.5 bn annually. If used to its full potential, the airport could raise income to sustain its operating expenses but that would not be enough to pay the instalment of loans

including interest.

Some economists are of the opinion that there was no proper homework about the operational side of the airport. According to them, it was necessary to make an action plan on how to operate the airport constructed with a loan.

“The loan was taken without taking these issues into consideration,” says economist Keshav Acharya, as per the report in The Annapurna Express. (ANI)