Tax Exemption Clears Path for Chinese-Funded Kalanki-Basundhara Ring Road Expansion

The expansion of the long-stalled second section of Kathmandu’s Ring Road, the Kalanki-Basundhara stretch, is set to move forward following a government decision to grant tax exemptions on imported construction materials and equipment for the Chinese-aided project.

The 8.2-kilometer Kalanki-Basundhara section, being developed with economic and technical assistance from the Chinese government, had been delayed for an extended period pending a resolution on tax exemptions.

Government spokesperson Om Prakash Aryal announced that a Cabinet meeting on Tuesday decided to provide tax exemptions on the import of necessary materials and equipment for the project's expansion.

The decision aligns with the Foreign Aid Mobilization Policy, 2025, which stipulates tax exemptions for projects funded by foreign grants and mandates that grant amounts not be used for tax payments.

The Ministry of Finance had already agreed to the tax exemption on January 28. The Cabinet decision now provides legal validation to that agreement.

Keshav Kumar Sharma, Secretary at the Ministry of Physical Infrastructure and Transport, confirmed that the Cabinet has also approved a proposal to waive visa fees for Chinese consultants, contractors, and workers involved in the project. "No taxes will be levied on the import of construction materials and equipment from now on," he stated. While Nepal has a policy of not charging visa fees for Chinese tourists, Chinese nationals arriving for employment purposes are normally required to pay such fees.

Secretary Sharma added that the Cabinet's decision has cleared the way to proceed with the project. "The implementation agreement between the two countries will now be signed," he said. Following that, the Chinese government will select a construction company to carry out the expansion, according to Arjun Prasad Aryal, Deputy Director General of the Department of Roads.

Aryal mentioned that they are preparing to contact Chinese officials to determine a timeline for signing the implementation agreement, following the Cabinet's decision. With elections approaching, preparations are expected to be completed by mid-March, with the signing potentially taking place by mid-April.

According to Aryal, after the agreement is signed, the design prepared by Chinese technicians will need approval, followed by the selection of a construction company and consultant. Once the contractor is chosen, the site will be handed over. If no issues arise, the construction company could be mobilized on site within the current fiscal year. Secretary Sharma expressed confidence that work on the Kalanki-Basundhara section will not face further delays, stating the government will ensure an environment for the timely completion and handover of the Chinese-assisted project. China previously expanded and handed over the first section of the Ring Road, from Kalanki to Koteshwor.

Upgrade to Eight Lanes

According to the Department of Roads, the second section will be upgraded to eight lanes, similar to the first phase. The road design includes a 3-meter median, 2.75-meter service lanes on both sides, and a 14-meter main lane.

Four foot-over-bridges will be constructed for pedestrians. The existing Bishnumati Bridge near the Gongabu bus park will be demolished, and a four-lane overpass will be built in its place. Two new bridges will be constructed for the service lanes on either side. Additionally, an underpass will be built in the Banasthali-Dhunge Dhara area.

An agreement for economic and technical assistance for the second phase of the Ring Road expansion was signed between the governments of Nepal and China in September-October 2018. The project cost is 567.13 million Chinese Yuan, provided as a grant.

Most recently, in September 2024, Nepal and China exchanged letters of agreement. Subsequently, China's CCCC First Highway Consultants and Xi'an Fangzhou Engineering Consulting prepared the Detailed Project Report (DPR). However, China has not yet provided the DPR to Nepal, pending the implementation agreement between the two countries. Discussions regarding the design have been ongoing between the Department of Roads and the Chinese side.

The Department of Roads has been informed that the Chinese side has incorporated improvements into the design for the second phase, addressing shortcomings observed during the expansion of the first phase. Notably, the first phase lacked structures such as medians and overpasses; following the handover by China, the Nepali government constructed the median, the overpass at Gwarko, and additional foot-over-bridges on the Kalanki-Koteshwor section.