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Updated: Nov 20, 2016 18:08 IST

In a surprise move, Nepal on Sunday announced the cancellation of all agreements with India’s Infrastructure Leasing and Finance Services for construction of a fast track road linking Kathmandu and Tarai.

The Nepal government and IL&FS had signed an agreement in March to prepare the detailed project report ( DPR) of the $1 billion road project.

At a meeting of the parliament’s development and finance committees, Ramesh Lekhak, Nepal’s planning and infrastructure minister announced all pacts signed with IL&FS are no more valid and all public announcements made by the Nepal government to develop the project are nixed.

There was huge uproar in Nepal over awarding the projects to an Indian company after the then Sushil Koirala-led government decided to award the contract to IL&FS.

IL&FS had spent over 40 million rupees for DPR and other paperwork, which the Nepal government has to compensate the Indian firm.

Some experts expressed concern over the financial arrangement wherein Nepal has to reimburse the Indian firm. The government of K P Oli, which took over after Koirala, decided to construct the project using its own resources and allocated 5.5 billion rupees to construct the project.

Given the strategic importance of the road, the current government has listed it as a national pride project.

Minister Lekhak said, “Now all bodies concerned should make decision standing together in course of taking the nation's pride project ahead.”

Lekhak said the government has tabled a proposal for constructing the 76 kilometres of the road with its own investment.

In October last year, Nepal’s Supreme Court had issued an interim order halting the government’s preparations to award the project to the Indian developer.

During the International Conference on Nepal’s Reconstruction in June 25, 2015, Indian External Affairs Minister Sushma Swaraj had pledged to expedite construction of the projects.

“Work on construction of the Kathmandu-Nijgadh fast track road and the Nijgadh airport with India’s participation be expedited. These projects will create new job opportunities, contribute to revenue, and facilitate long-term recovery,” she had said.