Kathmandu, 15 June 1972
The Government of INDIA,
hereinafter called “the G.O.I.”
His Majesty's Government of NEPAL,
BEING desirous of cooperating with each other in promoting the development of communications in Nepal ;
HAVE agreed as follows :
The G.O.I. agree to provide financial assistance to the extent of Rupees twenty five crores and eightytwo lakhs only in Indian currency
to be utilised before 31st March 1976 for construction of the Butwal-Nepalganj sector of the Mahendra Rajmarg of Nepal, hereinafter
called “the Project”.
The Project shall also include the construction of the link roads as mentioned in the Annexure No.I.
The agency/agencies responsible for the construction of the Project will endeavour to complete the Project by 31st March 1976.
The Project will be executed under the auspices of the Board set up by H.M.G. for the purpose of executing the Eastern Sector of
the Mahendra Rajmarg. The Director and Member (Finance & Accounts) of the Indian Cooperation Mission and the Chief Engineer
of the Project will continue as Advisers to the Board and will be invited to attend all the meetings of the Board.
The G.O.I. will place at the disposal of the Board a suitable organization of the Central P.W.D. under a qualified Chief Engineer
for the execution of the Project. Nepalese engineers and overseas will be afforded facilities for training on the Project and also
employment facilities will be afforded to them on posts for which they are qualified by their training and experience.
The general alignment of the Mahendra Rajmarg and general technical data (i.e. the frequency and magnitude of possible traffic, the
design speed and the class of traffic for which the bridges have to be designed) will be as in Annexure No. II. The Board will approve
the annual budget estimates for the Project and review the progress of work periodically. Budget estimates, as approved by the Board,
will be duly reflected in H.M.G.’s budget.
The Chief Engineer will execute the Project and will submit quarterly expenditure statements to the Board. He will also render accounts
to the Accountant General in India for the money spent from Indian aid funds.
The requirements of funds for the project will be worked out and intimated to the Board as well as to the Indian Cooperation Mission
by the Chief Engineer on an annual basis and the Indian Cooperation Mission will arrange for the release of the necessary amounts
to the Chief Engineer accordingly under intimation to the Board.
H.M.G. will provide necessary land for the Project free from all encumbrances. The payment of compensation, if any, and the settlement
of claims from disputes arising there from will be responsibility of H.M.G. H.M.G. shall also arrange the supply of timber, (including
ballies) sand, stone, limestone, soil for burning bricks and other raw materials required for the project, free of royalty, excise
duty, licensing fee and other levies.
H.M.G. will ensure that the goods, materials, equipment, machinery and transport, etc., which are brought into Nepal or are moved
from one place to another within Nepal for the execution of the Project either by the Project authorities or by the contractors employed
on the Project, are afforded expeditious transit from India to Nepal or within the territory of Nepal, and are exempt from licensing
requirements and from payment of all customs duties, taxes, cesses and levies of any kind. H.M.G. will also ensure that the goods,
materials, equipment, machinery and transport etc., brought into Nepal from India as above, will be allowed to be taken back to India
when no longer required for the execution of the Project, subject to the provisions contained in Article XI hereunder. Exemption
from licensing requirements and from payment of all customs duties, taxes, cesses and levies of any kind shall also extend to the
transport and goods for personal use of India-based personnel working for the Project. The principles and procedures regarding the
facilities to be extended to the Indian contractors and exemption from import and export duties and other local levies, of all supplies,
materials equipment and vehicles etc. imported for contract work, as worked out between the Director, Indian Cooperation Mission
and H.M.G. for the Trisuli Hydel Project will apply mutatis mutandis to the Project. This will include exemption from income tax
and other taxes except contract tax.
The contract tax payable by Indian contractors will be collected by the Project authorities and then credited to Project funds under
advice to H.M.G.
Such of the road building equipment and machinery made available by the U.S. Government for use on the construction of the Eastern
Sector of the Mahendra Rajmarg as remains serviceable may be utilised on the construction of the Project when no longer required
for the Eastern Sector.
If any plant or machinery has to be imported for the execution of the Project, H.M.G. will provide necessary foreign exchange against
rupee payment for the purpose.
Of the construction equipment, machinery, vehicles, etc. purchased out of the Project funds, the Project will be debited only with
the depreciation in the value of these articles except those which may be required and retained for maintenance.
All residual construction equipment, machinery, vehicles etc. on the completion of the Project, will be disposed of as under :
(a) Items of equipment, machinery, vehicles etc. required for other ICM Project will be released on the authority of the Director
ICM under intimation to H.M.G. The depreciated value of such items will be credited to the project and debited to Aid funds.
(b) If HMG are in need of certain items of surplus equipment, machinery, vehicles etc., such items may be released with the agreement
and under the authority of the Director, ICM. Necessary credit of the depreciated value of such items will be afforded to the project
by per contra debit to Aid funds.
(c) Surplus items of equipment, machinery, vehicles, etc. required neither by HMG nor by other ICM projects may be considered for
use in projects in India with the knowledge and approval of H.M.G. Credit for the depreciated value of such items will be afforded
to the Project.
For the purpose of speedy communications along the Project alignment, H.M.G. will grant permission for installations of necessary
The Project authorities, or their contractors, shall be allowed to import from India skilled and semiskilled labour to the extent
not available in Nepal. H.M.G. will make arrangements to ensure that the requirements of unskilled labour for the Project are fully
H.M.G. will extend all possible help and cooperation to the Project authorities in the maintenance of peaceful labour relations and
the safeguarding of the personnel and property of the Project in the event of a strike.
Contractors of the Project from outside Nepal will be free to import any amount of currency that may be deemed necessary but will
convert it into Nepalese currency at legally recognised exchange counters for transactions inside Nepal for the execution of their
work. They will be allowed to repatricate their currency holdings which will be converted into Indian currency by the Nepal Rastra
H.M.G. will ensure expeditious grant of licences, permits and similar other authorisations necessary to enable the project authorities
and their contractors to execute the work relating to the Project.
H.M.G. will make necessary security arrangements for the protection of the personnel as well as the materials, equipment etc., at
all the various sites of construction and operations, including in transit where necessary.
In the event of any legal action arising from authorities undertaken in pursuance of this Project, H.M.G. will assume full responsibility
for the defence of such actions in Nepal and will take responsibility for the continued execution of the Project and will assure
immunity from garnishment or any other legal process of title to all contributions made for or property and benefits derived from
the execution of the Project.
H.M.G. will take over the responsibility for maintenance of sections of the project as and when they are certified as completed by
the Chief Engineer, unless it is otherwise agreed between H.M.G. and G.O.I. for the maintenance of the project to be carried out
by the Chief Engineer for some specified period, after its completion.
Any expenditure incurred by the G.O.I. before the signing of this Agreement in pursuance of the implementation of the Project shall
be debited to overall aid under this Agreement.
This agreement shall come into force with effect from the date on which it is signed and will continue to remain in force until the
31st March 1976, unless terminated earlier by either party by giving three months notice in writing to the other party or extended
by mutual agreement as necessary.
IN WITNESS WHEREOF, the undersigned, being duly authorised by their respective Governments, have signed the Agreement.
DONE at Kathmandu in the English language in four copies of this Fifteenth day of June, One Thousand Nine Hundred and Seventy two.
For the Government of India For His Majesty's Government of
L.P. SINGH B.B. PRADHAN
Ambassador of India Secretary
in Nepal Ministry of Finance
LINK ROAD FOR MAHENDRA RAJMARG
(CENTRAL SECTOR) FROM BUTWAL TO NEPALGANJ