Although the Government of Nepal has prioritized railway development, it is projected to be exceedingly costly. The government has already initiated half a dozen projects aimed at expanding internal and cross-border railway networks. These projects include the East-West Electric Railway, cross-border railways connecting the Nepal-India border, the Kathmandu-Pokhara and Kathmandu-Lumbini railways, the Kathmandu Valley Metro Rail Project, the Kathmandu-Kerung Nepal-China railway, and the Kathmandu-Raxaul Nepal-India cross-border railway.
However, stakeholders have expressed concerns about the significant financial resources required to construct these railways.
“Taking into account the compensation amount, the estimated cost of the East-West Railway alone will be Rs 4000 billion,” said Minister for Physical Infrastructure and Transport, Devendra Dahal, at a programme in Kathmandu on Wednesday.
Similarly, a survey conducted by the ministry has revealed that constructing the 140.79-kilometre cross-border Kathmandu-Raxaul railway will cost Rs 339 billion (excluding compensation). This survey was funded by the Government of India. The survey is akin to a detailed project report (DPR), but the financial modality for this project has not yet been finalised.
Speaking at an interaction titled "Roadmap for Railway Development in Nepal," organised by the Nepal Intellectual Council in Kathmandu on Wednesday, former Director General of the Department of Railways, Rohit Kumar Bisural, noted that the allocated budget for railway development is insufficient.
“The government has allocated only Rs 5-6 billion for projects that cost trillions of rupees,” he said. “From fiscal year (FY) 2009/10 to FY 2023/24 , Nepal has already spent Rs 33.28 billion on land compensation and other railway-related expenses.”
Government officials also acknowledge that the current investment is inadequate.
“An annual budget of Rs 125 billion is required for railway development,” stated Secretary Keshav Kumar Sharma of the Ministry of Physical Infrastructure and Transport.
Railways are considered cheaper than roadways for transportation, but the initial construction costs are high.
Former Finance Secretary Lal Shankar Ghimire pointed out that 93% of the country's gross domestic product (GDP) is spent on consumption, making it difficult to gather funds for large projects from the remaining 7% savings. He criticised the Sixteenth Five-Year Plan for lacking a clear blueprint for railways, despite the government's stated desire for railway development.
Advising against relying too heavily on foreign investment, he mentioned that foreign aid would be limited. During the interaction, stakeholders raised questions about whether the East-West Railway is truly necessary, how to secure funding, and whether the government has prepared the necessary manpower and plans for railway development over the next 20 years.
“Why is the East-West Railway needed? Parallel to it are the Mahendra, Hulaki (Postal), Pushpalal, and Madan Bhandari highways,” Ghimire remarked. “We should rather focus on the north-south axis where there is greater trade and human movement. Over the next 20 years, we must also seriously consider the use of blended finance tools and secure investment for such projects.”
He also suggested that the construction of the metro rail in the Kathmandu Valley should be a top priority. Sharma from the Ministry of Physical Infrastructure mentioned that although they are aware of the many benefits of railways, they have been unable to increase investments or advance the projects properly.
“Neglecting railway development and its expansion will hinder the expected progress,” he stated, adding that the Sixteenth Plan did not include clear policies or goals regarding railways. “Ambitious targets for railway development were set in the Fifteenth Plan,” Secretary Sharma added.
Sharma also pointed out that land acquisition is another major challenge for railway expansion. “Land is extremely difficult to acquire, and compensation is very costly,” he said, “Moreover, preparing skilled manpower is equally important.”
According to the ministry, the preliminary feasibility studies, detailed feasibility studies, and DPRs for several sections of the East-West Railway have already been completed. The Jogbani-Bijalpura railway, built with the support of the Indian government, is already operational.