Nepal Government Grants Tax Exemptions for Second Phase of Kathmandu Ring Road Expansion by Chinese Firm

Kathmandu. The government has decided to grant the Chinese construction company all types of tax exemptions for the expansion of the second section of the Kathmandu Ring Road (Kalanki–Basundhara). This paves the way for the project, which is being built with financial and technical assistance from the Chinese government, to move forward.

According to Tanka Prasad Pandey, spokesperson for the Ministry of Finance, the ministry recently provided consent to the Ministry of Physical Infrastructure and Transport for exemptions on all customs and internal taxes applicable to construction materials, equipment imports, salaries, and procurement of construction materials. “The Finance Ministry has recently agreed to all their demands and sent the file to the Physical Infrastructure Ministry. How and when the work will proceed will be determined from there,” said spokesperson Pandey.

This section is being expanded with financial and technical assistance from the Chinese government; the first section (Koteshwor–Kalanki) was previously expanded by China. China started the expansion of the Koteshwor–Kalanki section (10.39 kilometers) in 2069 BS. This road, expanded to eight lanes, was completed in 2075 BS with a grant of approximately 5 billion Nepalese Rupees from China, during which the government provided overall tax exemptions.

How Will the Work Proceed Now?

The Ring Road Expansion Project had sent the file seeking agreement on financial matters, including tax exemptions, after the last Dashain festival. The Finance Ministry recently provided consent after a delay of about three months.

With the Finance Ministry's consent secured, the Ministry of Physical Infrastructure and Transport will now present the draft implementation agreement to the Cabinet. After approval from the Cabinet, the implementation agreement will be signed between the governments of Nepal and China, after which the Chinese company is expected to commence construction work.

Previously, work on this project had stalled for about seven years due to the non-finalization of the implementation agreement process. The agreement with China for the expansion of this section was signed in 2075 BS. At that time, on Jestha 14, 2075 BS, the project issued a notice asking for the removal of structures encroaching on the road boundary, and these were removed. However, construction work could not proceed due to various reasons, including COVID-19.

More recently, on Bhadra 6, 2081 BS, representatives of the Nepal and Chinese governments signed a letter regarding cooperation in road expansion. Furthermore, on Mangsir 18, 2081 BS, during the visit of then-Prime Minister KP Sharma Oli to China, a joint statement issued after high-level meetings with President Xi Jinping and Chinese Premier Li Qiang included an agreement to implement the second phase of the Kathmandu Ring Road Improvement Project.

Accordingly, the Chinese team designed this section. Additionally, during the third Secretary-level meeting of the Nepal-China Border Trade and Cooperation Coordination Mechanism held in China on January 20 and 21, 2026, an agreement was reached to expedite the expansion of this section.

Expansion to Eight Lanes Including Overpass and Footbridges

The design for the expansion of this approximately 8.2-kilometer section was done by the Chinese state-owned companies CCC First Highway Consultants and Xian Fanzhou Engineering Consulting Limited. It will be expanded to eight lanes according to Chinese urban road standards.

Furthermore, the design includes the construction of a 16-meter-long overpass at Kalanki–Swayambhu and a 64-meter bridge over the Bishnumati River. Additionally, 13 culverts and four disability-friendly footbridges will be constructed. These footbridges will be built between Sitapaila–Swayambhu, DhungeDhara–Balaju, Balaju–Machhapokhari, and Samakhusi–Basundhara Chowki.

To facilitate traffic management, a 560-meter-long overpass has been designed for construction from Machhapokhari to the Bus Park. The design for the road includes 11 intersections and 22 bus stops for vehicle and passenger destination changes. Out of the total road width of 38.5 meters, there will be 2.75 meters of footpath on both sides, four lanes of road in each direction, and a three-meter section in the middle for planting trees and managing electricity and internet cables.

It is expected that traffic management in Kathmandu will see significant improvement once construction work on the second section begins. The third section of the Ring Road, Maharajgunj–Koteshwor, is being advanced for expansion by the Nepal government itself. The Road Division Kathmandu is currently advancing the expansion from Maharajgunj to Chappal Factory.

The Division also stated that a budget proposal amounting to 510 million Nepalese Rupees for the expansion of the approximately 900-meter road section from Chappal Factory to Dhobikhola has been sent to the National Planning Commission for budget approval.