Why Infra Projects Keep Stalling

“We have been asked  to fast-track the  project under laws  dating back to the  1950s. If these laws are not updated  in time, I cannot assure completion by  2027,” then Nepali Army Chief Prabhu  Ram Sharma told the State Affairs  and Good Governance Committee  of the House of Representatives on  December 21, 2023, while presenting a  progress report on the Kathmandu–Tarai  Expressway. 

He warned that the 2027 deadline  would be impossible without revising  the Forest Act and the Land Acquisition  Act. 

Sharma said it can take up to nine  months just to secure approval to cut  four trees at the project site. He also  flagged major hurdles in land acquisition.  “Landowners are demanding far more  than what the government is willing to  pay. Acquiring private land has been a  huge challenge, and this is another key  reason for the delay,” he said. 

The Kathmandu–Tarai Expressway is one  of the government’s flagship projects.  But progress has been slow, even with  the Nepali Army leading construction.  Like many publicly funded infrastructure  projects, it is running behind schedule.  Work began in August 2017 with a  four-year deadline. As delays mounted,  the government extended the timeline  to August 2021, and then to December  2024. With that timeline also proving  unrealistic, the completion date has now  been pushed to April 2027. 

The 70.97-kilometer project is a clear  example of how infrastructure is  managed in the country. Outdated laws,  complex procurement rules, and weak  project preparation continue to slow  infrastructure projects. These systemic  bottlenecks in project implementation  are visible across the country. 

Construction of the Koshi Corridor  road project began in FY 2008/09. The  162-km road runs from Basantapur  in Terhathum to Kimathanka on  the Nepal-China border. Originally  scheduled for completion in 2023/24,  the timeline has now been extended to  2028/29. Progress stands at just 46%  and costs have risen from Rs 11.93  billion to Rs 16.20 billion, with Rs 6.85  billion already spent. 

Work on the Kaligandaki Corridor also  remains incomplete. The 495-km road  connects Gaindakot on the East-West  Highway to Maldhunga of Parbat and  extends along the Beni–Jomsom to  Korala on the Nepal-China border.  So far, 87 km is graveled and 328 km  blacktopped. However, contracts  are still pending for 40.42 km of  blacktopping and 22 bridges. Overall  progress of the project stands at  82.05%. 

The Karnali Corridor shows even slower  progress. Since construction began in  2008/09, physical progress has reached  just 20.5%. The deadline, originally  set for 2013, has now been pushed to  2027/28. Costs have surged from Rs  4.10 billion to Rs 18.66 billion.  The Mid-Hill Highway, one of Nepal’s  largest infrastructure projects, has  been under construction for nearly  two decades. It is still incomplete, with  progress at 84.69%. Of the planned  1,879 km, 1,067.6 km has been  blacktopped and 114 bridges built. Costs  have jumped from Rs 33.36 billion to  Rs 84.33 billion, with Rs 71.91 billion  already spent. Even here, new contracts  have been stalled due to a lack of  resource approval. 

A similar situation exists in the Madan  Bhandari Highway Project. No new  contracts have been awarded this fiscal  year. Work is limited to older contracts,  even as the liabilities stand at around Rs  14 billion against an allocation of just Rs  2.50 billion. 

Nepal does not lack ambition. Roads,  transmission lines, irrigation systems,  airports, and urban projects are  announced every year. The challenge  lies in execution. The gap between  allocation and completed projects  has become a serious constraint  on economic growth. A recent  World Bank report, Nepal Capital Expenditure Bottlenecks Analysis,  finds that persistently low execution of  infrastructure spending has limited the  buildup of public capital, creating major  barriers to economic growth.  The problems begin early. Projects  often enter the budget without proper  appraisal, realistic costing, or clear  timelines. Procurement processes  are slow and rigid. The system relies  heavily on the lowest bidder, often at  the expense of quality. Monitoring is  weak, with little real-time data to track  progress or resolve bottlenecks.  Structural constraints add to the  problem. Land acquisition disputes,  lengthy environmental and tree-cutting  approvals, and weak cash management  all affect project implementation.  Budget reallocations and gaps in  procurement rules create further  uncertainty. These challenges are  interconnected and reinforce each other  across the project cycle. 

The Promise and the Paradox 

Few countries need infrastructure as  urgently as Nepal. Its geography makes  connectivity costly and complex. Poor  transport raises trade costs, weak  transmission systems limit hydropower  use, and inadequate urban systems  constrains productivity. 

To further aggravate the situation, the  country’s public capital base has been  eroding. Public capital stock, once  estimated at around 75% of GDP in the  mid-1990s, fell to about 54% by 2019.  Spending has been inconsistent.  Between 2005 and 2015, capital  spending averaged just 2.7% of GDP.  This is well below what comparable  economies were investing. After the  2015 earthquakes and the shift to  federalism, public investment rose  sharply, peaking at 11.4% of GDP in  2021. But the momentum did not last.  According to Rabi Singh, former  president of the Federation of  Contractors' Association of Nepal,  Nepal’s weak capital expenditure is  not just a budgeting issue; it directly  translates into stalled, delayed, and  poorly executed projects. “Low and  uneven capital spending means  projects do not get money when they  actually need it. Although budgets are  announced at the start of the fiscal year,  funds are often released late or in small  tranches,” he added. 

Because of this, contractors cannot  mobilize equipment, labor, or materials  on time. Many projects only begin meaningful work in the final quarter  of the fiscal year, compressing what  should be a year-long construction cycle  into just a few months. This leads to  rushed work, compromised quality, and  incomplete infrastructure. 

By 2023/2024, capital expenditure  had dropped back to 7.9% of GDP. At  the same time, total capital allocations  across federal, provincial, and local  governments fell from around 20% of  GDP to 12% between 2019/2020 to  2023/2024. 

Even allocated funds are not fully spent.  Between 2020/2021 and 2023/2024,  under execution reduced public  investment by about 5% of GDP on  average. 

For a country that needs to invest  10-15% of GDP over the current decade  to close its infrastructure gap, that  shortfall is quite significant.  Another major impact is the  stop–and–go nature of projects. When  capital expenditure remains low, like  the roughly 19% spending by mid-year,  contractors face cash flow problems  because payments are delayed. This  slows progress, and in some cases  leads to contractors abandoning sites  altogether. Smaller contractors are  especially vulnerable, as they lack the  financial buffer to sustain long delays in  government payments. 

Too many projects, too little  discipline 

The breakdown in the capital spending  system begins well before construction.  In theory, projects are supposed to pass  appraisal before they enter the budget.  The National Project Bank was created  to ensure that only well-prepared and  prioritized projects receive funding. In  practice, it does not. 

Projects continue to enter the  Medium-Term Expenditure Framework  and annual budgets without passing a  credible prioritization process. Many  lack proper feasibility studies, realistic  cost estimates, or clear timelines.  Instead of focusing resources on a  manageable number of high-priority  projects, funding is spread thinly across  too many projects. The result is over  commitment. 

According to Singh, when projects  are chosen for political appeal, they  are typically driven by short-term  incentives: winning votes, satisfying  local constituencies, or showcasing  visible “development” before elections.  “This means leaders may prioritize  projects that are highly visible, like  roads in specific districts or symbolic  infrastructure, rather than those that  are technically sound or economically  necessary,” he added. 

Data from a subset of major projects  illustrates the scale of the problem. For  17 ongoing national pride projects, the  allocation provided in the 2023/2024  budget implies a completion timeline  of 41 years. Even if the entire federal  capital budget were directed exclusively  toward those projects, it would still take  eight years to complete them. 

This problem is visible in large transport  projects as well. When funding is spread  thinly across multiple packages and  years, projects such as the East–West  Highway expansion struggle to  maintain momentum across all sections,  leading to uneven and prolonged  implementation. This is not a financing  problem alone. It is a planning problem.  Too many projects are approved without  a clear understanding of what it will take  to finish them. 

According to experts, ignoring economic  return further weakens outcomes.  Ideally, capital expenditure should go  into projects that generate productivity,  like transport corridors, irrigation  systems, or energy infrastructure that  boost industry and agriculture. “But  politically motivated projects may not  deliver sufficient returns, meaning public  money is spent without significantly  improving growth or livelihoods,” Singh  said. 

This also leads to budget fragmentation.  To satisfy multiple political interests,  many small projects are included in  the budget rather than focusing on a  few well-prepared, high-impact ones.  Each project then receives limited  funding which slows progress across  the board and leads to a proliferation of  incomplete works. 

Delayed Before Work Begins 

Even when projects are approved and  budgeted, many are not ready to begin.  Two bottlenecks dominate the early  stages of project implementation: forest  clearance and land acquisition. Securing  permission to cut trees for infrastructure  projects typically takes between 22  and 24 months. The process involves  multiple layers of approval across  ministries, provincial authorities, forest  offices, and the Cabinet. 

A key source of delay is the requirement  for a manual tree census conducted  by district forest offices. This process  alone can take around 10 months. If  the census results differ significantly from the original environmental impact  assessment, authorities may require a  supplementary assessment, effectively  restarting the process. 

The system is not only slow. It is  circular. Projects that have already  been appraised and approved can find  themselves repeating core steps due  to discrepancies and procedural gaps.  Digital tools that could speed up surveys  are rarely used. 

According to Singh, tree-cutting  permissions have remained a chronic  bottleneck across high-value public  works in Nepal for a long time. “It  has significantly delayed project  implementation. Multiple projects  are held up for months because  environmental clearances take far too  long, creating a stop–start pattern in  construction that inflates costs and  reduces efficiency,” he added.  Singh adds that despite repeated  discussions and calls for reform over  the years, the government has yet to  take proactive measures to streamline  approval processes or improve  coordination across agencies.  The delays stem from a combination  of institutional and legal weaknesses.  Nepal’s land information systems are  incomplete and not fully integrated.  Different agencies use different  valuation methods. Official valuations  often fall below market prices, leading to  disputes over compensation. 

The legal framework itself is outdated.  The Land Acquisition Act, which dates  back to 1977, does not adequately  address modern infrastructure needs  or the realities of informal land use.  Disputes are common, and litigation can  stall projects for years. Together, these  bottlenecks mean that many projects  enter the budget without being truly  ready. 

Weak Cash Management 

Even projects that clear early hurdles  face challenges during implementation.  One of the most persistent features  of Nepal’s capital spending is the  concentration of expenditure in the final  months of the fiscal year. This pattern  is partly driven by delays in project  readiness and procurement. But it is also  a result of how cash is managed.  Although spending units are formally  authorized to use their full annual  budget once it is approved, funds  are effectively released every  quarter. When revenue falls short of  expectations, as it has in recent years,  the government often resorts to cash  rationing. This creates uncertainty for  implementing agencies and contractors.  Projects that are ready to move may  face delays simply because funds are not  available at the right time. 

According to Devendra Karki, a former  government secretary, the major  challenge is payment issues. “Funds  are often released in small, fragmented  tranches rather than in sufficient  amounts to sustain work. Contractors  cannot mobilize labor, machinery,  or materials efficiently under these  conditions. This results in slow progress  and increased costs,” he added.  Foreign-funded projects face an  additional layer of complexity.  Reimbursement-based financing  arrangements mean that funds for  later quarters may depend on spending  in earlier ones. When domestic  co-financing falls short or reporting is  delayed, fund releases can be held back  which creates a cycle of low execution.  The result is a system where money  arrives late and must be spent quickly,  often at the expense of efficiency and  quality. 

Procurement: The Final Choke Point 

Procurement remains another major  hurdle. Procurement data from World  Bank systems show that Nepal has the  longest average contract processing  time in South Asia. According to the  World Bank’s Systematic Tracking of  Exchanges in Procurement (STEP), the  government took an average of 231  business days to complete various  stages of procurement for contracts  awarded between 2018 and 2024. This  is well above the South Asia average of  192 days. 

A business process review of 19 largest  active World Bank-funded contracts  in Nepal found average delays of  89 business days for consultancy  contracts and 110 business days for  works contracts. Among consultancy  contracts, the main bottleneck was  the preparation of the bidder shortlist  and Request for Proposals, with delays  of around 100 business days beyond  planned timelines. For works contracts,  delays were driven largely by time  overruns in preparing pre-qualification  evaluation reports and drafting bidding  documents. The reasons are both  procedural and structural. 

Procurement decisions often pass  through multiple layers of approval,  even for relatively small contracts.  Project implementation units have limited authority, and key decisions must  be escalated up the hierarchy. Paper  based processes and the absence of  standardized workflows add further  delays. The regulatory framework also  creates perverse incentives. Contracts  are typically awarded to the lowest  evaluated bidder, with limited scope to  reject bids that are unrealistically low.  This can lead to poor quality work or  cost overruns later. 

At the same time, strict penalties for  contract termination make it difficult to  manage underperforming contractors,  often leading to prolonged disputes.  These dynamics are visible in large scale  road projects. The East–West Highway  upgrade works, spread across multiple  packages, have faced delays linked to  procurement processes and contract  execution challenges. 

When Approvals Stall, Everything  Stalls 

Construction of national pride and  strategically important projects is now  at risk of being delayed by at least a  year, as the government has yet to grant  multi-year resource approval.  Although the Ministry of Finance  introduced the Multi-Year Project  Resource Agreement Criteria in  mid-December, it has not been  implemented. As a result, new contracts  for major projects cannot be awarded  in the current fiscal year, according to  project officials. 

This has affected several road projects,  including the Koshi, Kaligandaki, and  Karnali corridors, as well as the Mid-Hill  Highway and other strategic networks.  Under the guidelines, agencies were  required to submit proposals to the  National Planning Commission (NPC) by  mid-December. The NPC was expected  to complete its review by mid-January  and forward recommendations to the  Ministry of Finance for a final decision  by the end of January. However, no  decision has been made so far. The  delay has created uncertainty across  major infrastructure projects. Even  where proposals were submitted on  time, the lack of approval has stalled  procurement. This has prevented new  contracts and slowed progress.  Officials say no new work can begin  without resource approval. Ongoing  work under existing contracts can  continue, but if approval is not granted  within the current fiscal year, the  procurement cycle will shift to the next  year, pushing timelines further out, they  say. 

The process was further slowed by the  election code of conduct, which limited  administrative decisions, enforced for  the March 5 elections. 

According to Karki, a major hurdle in  Nepal’s infrastructure development  is the lack of clear ownership and  coordination of government projects.  Currently, many projects are treated  as belonging solely to individual  departments—for example, road  projects are often managed only by  the Department of Roads, while forest  or environmental issues are handled  separately. Similarly, the Ministry of  Finance controls budget approvals  independently, creating situations where  funds are delayed or not released on  time. 

“Without a coordinated approach,  projects will suffer as there is no  collective accountability or support.  For infrastructure projects to progress  effectively, all relevant government  bodies must take joint ownership of  major projects, working together to  provide approvals, technical guidance,  and financial support,” said Karki. 

The Ministry of Finance says  it is committed to speeding up  implementation through multi-year  budgeting. But the current delays point  to deeper structural weaknesses in how  projects are approved and executed. 

Can Nepal Learn to Finish What it  Starts? 

Fixing capital expenditure problems will  require more than incremental reforms.  It will require a shift in how the state  approaches public investment. The issue  is no longer how much Nepal budgets  for infrastructure, but whether it can  build what it budgets. 

The first step is discipline at entry.  Projects should not enter the budget  without a credible appraisal, realistic  costing, and a clear financing path.  The second is visibility. A reliable,  integrated system that tracks project  costs, timelines, and progress is  essential for effective planning and  monitoring. The third is prioritization.  The current portfolio is too large and too  fragmented. Rationalizing projects and  focusing resources on those that matter  most will be critical. 

At the same time, key procedural  bottlenecks must be addressed. Forest  clearance and land acquisition processes  need to be streamlined and modernized.  Cash management practices must  be aligned with project needs, not  just revenue flows. Procurement  rules should balance efficiency with  quality, allowing for better judgment in  contractor selection. 

None of these reforms is simple.  But without them, the gap between  ambition and execution will persist.  Nepal does not lack plans. It does not  lack projects. What it lacks is a system  that can consistently take projects  from paper to completion. Until that  changes, the country’s infrastructure  gap will remain not just a development  challenge, but a structural brake on  growth. 

According to Karki, issues arise from  mismatches between contractor  capacity and project size. “Some  contractors take on projects larger  than their equipment, workforce, or  technical expertise can handle. In many  cases, critical machinery is limited to  one location while projects are spread  across multiple sites. This forces delays  or inefficient work practices,” he said.  “Until these issues are addressed,  Nepal’s infrastructure development  will continue to face chronic hurdles  and even well-funded projects with  approved plans can be delayed for  years. 

This report was originally published in April 2026 issue of New Business Age magazine.