January 12: Seven decades after Kathmandu-based Tribhuvan International Airport (TIA) came into operation, two more international airports have started operation in Nepal. However, critics doubt whether the country can bear the burden of debt incurred for the construction of these airports built with massive foreign loans. A section of critics has been arguing that the twonew airports will turn into white elephants.

The Gautam Buddha International Airport (GBIA) was built with loans and grants from the Asian Development Bank (ADB) and loans from the OPEC Fund for International Development (OFFID). Likewise, the Pokhara Regional International Airport (PRIA) also received a line of credit from China's Exim Bank.

The PRIA was built with a loan assistance of Rs 22 billion from the Exim Bank of China. The Government of Nepal had signed a loan agreement of 1.37 billion Chinese Yuan with China's Exim Bank seven years ago. However, the government has been exempted of paying interest on 25 per cent of the loan. It means that the government does not have to pay interest on 344.46 million Yuan while it has to pay 2 per cent interest on the remaining amount. This loan has a grace period of 7 years and is to be repaid in a total of 20 years.

The grace period is ending soon. According to the Civil Aviation Authority of Nepal (CAAAN), it has to pay the first installment of 53.28 million Yuan in March. The second installment should be paid after six months. The authority should repay the loan of Exim Bank twice a year.

Similarly, the government had signed an investment agreement for the construction of Gautam Budh International Airport eight years ago. In 2014, the government signed another agreement with ADB for more investment. Following the agreements, ADB decided to extend loans of USD 402.75 for the GBIA project. ADB also pledged a grant of USD 105.7 million for the airport. The interest rate of the loan is 1 per cent during the grace period and then one and a half per cent.

OFFID has also invested USD 15 million in Gautam Buddha. The grace period of the loan of this airport ended four years ago and the payment of installment on principal and interest has already started. The authority has paid 4 installments so far. CAAN said that installments have not been paid since the onset of Covid-19.

Gautam Buddha's installment is also bi-annual. Its installments should be paid in the months of Baishakh (mid-April to mid-May) and Kartik (mid-October to mid-November). The government has to pay USD 112,709 in one installment.

There is currently a debate going on about whether the government can pay the interest on the loan invested heavily by the development partners in these two airports.

Pradeep Adhikari, director general of CAAN, said that it is too early to jump into a conclusion as the airport has recently been put into operation just now. "In a tourist hub like Pokhara, such an airport should have been built 15 to 20 years ago," he said.

 Some stakeholders argue that one has to wait patiently to reap the benefits from the new airports.

Former Finance Secretary Rameshwar Khanal believes that the Pokhara Airport can pay off the loan in 17 years and Gautam Buddha Airport in 10 years. 

"For this, 400,000 passengers will have to fly/land at Pokhara airport in the next 2 years," said Khanal, "On the other hand, Gautam Buddha's capacity is to serve 32 million passengers annually. Even if it serves half of the passengers immediately, the maximum time to repay the loan will be 10 years. It can be paid,” he assured.