The Asian Development Bank (ADB) will provide a soft loan of USD 25 million to Nepal to complete a tunnel to address a severe water shortage in the country's capital.
The tunnel is part of Melamchi Drinking Water Project, an ADB-funded scheme aimed at supplying water to three million people in Kathmandu Valley.
"Once completed, Melamchi tunnel will be a lifeline for the people of the Kathmandu Valley," said Fei Yue, Director of the Urban Development and Water Division in ADB's South Asia Department.
"The tunnel will not only bring the people of Kathmandu more clean water, but also support other downstream water supply and wastewater projects in the Kathmandu Valley."
The 27.5-km tunnel, to be completed by September 2016, will bring 170 million litres of water a day from Melamchi river to Kathmandu.
More than 2.5 million people of the Kathmandu Valley have long suffered because of inadequate and unreliable clean water supplies. They have used bottled water, collected rainwater or drilled wells, leading to increasingly polluted wells and falling levels in key aquifers, said a statement from ADB.
ADB approved a restructured USD 137 million loan in 2008 for the Melamchi Water Supply Project, then estimated to cost USD 317 million. But the project's completion was delayed by political and economic uncertainties, changes to the design, and most recently, the need to find a new contractor.
A Chinese company's contract was cancelled by ADB after it failed to meet a deadline and an Italian company was appointed to complete the tunnel.
With ADB's additional funds, along with an extra USD 13.1 million from the Nepal government, the overall cost for the project has risen to USD 355.4 million.
A water treatment plant, financed by the Japan International Cooperation Agency, is being built in Sundarijal on the outskirts of Kathmandu to treat water brought through the tunnel.
ADB approved a USD 80 million loan in 2013 to rehabilitate the sewerage network and build treatment plants to deal with over 90 million litres of wastewater a day in Kathmandu.
