Kathmandu-Japan International Cooperation Agency (JICA) signed an additional ODA Loan of JPY 5.7 billion for the Nagdhunga Tunnel Construction Project, bringing total support to over JPY 22 billion.

The project aims to improve connectivity between Kathmandu and key regions of Nepal by easing congestion at the Nagdhunga Pass.

Now in its final phase, the tunnel has achieved about 99 percent  physical progress and is expected to open in July 2026. The 2.68 km tunnel will significantly transform regional travel and strengthen economic connectivity.

Beyond infrastructure, the project introduces advanced tunneling technology, supporting resilient and sustainable development.

The project is being implemented with a concessional loan of Rs 16 billion from the Government of Japan and Rs 6 billion from the Government of Nepal. The government is preparing to take an additional loan of Rs 5.5 billion.

Officials at the Department of Roads say the cost has risen due to design changes, additional structures added during construction, repeated obstructions, higher consultancy expenses, and compensation claims by the contractor. Preparations are under way to secure the additional loan from Japan, but the agreement has not yet been signed.

The department said the additional financing factors in rising construction and consultancy costs, as well as the potential settlement of compensation claims. Talks on the loan are ongoing.

The project was inaugurated on Kartik 4, 2076 BS and was scheduled for completion within 42 months by Chaitra 2079 BS. Construction was disrupted by the Covid pandemic, local obstructions, and design changes. In some instances, work stopped for up to a month due to local protests. In Chaitra 2081 BS, construction was halted for 28 days and later resumed with the deployment of security personnel.

After extensions granted following the pandemic, the project was expected to be completed by Asoj 2082 BS, or October 2025. As work could not be finished within that deadline, the completion date has now been extended to Baisakh 2083 BS.

The 2.5 kilometre main tunnel was fully bored on Baisakh 3, 2081 BS, but operations have yet to begin.

The project has called international tenders twice to operate the tunnel road. The first tender was not opened. A second tender was issued after revisions to several provisions. The deadline for the second tender expires on Wednesday.

The tunnel road will be operated through a joint venture. International bidders must partner with a Nepali service provider. Project officials said details of the participating companies will be known after bids are opened.

The project also aims to complete landslide management works at the western portal in Dhading within the same period. After a new design was deemed necessary, the government granted the contractor an additional six months last Kartik. Officials said work is under way to complete the task within the extended deadline.

Five toll plazas are under construction at the eastern Kathmandu portal and the western Dhading portal. The project said construction of the toll plazas has been accelerated alongside landslide management works.