KATHMANDU: The master plans prepared by the Civil Aviation Authority of Nepal (CAAN) in 2018 for upgrading Dhangadhi, Nepalgunj, and Biratnagar airports had estimated the cost at four billion rupees each. However, when it became clear that just land acquisition would cost 12 billion rupees for a four-billion-rupee project, the authority hesitated.

Nevertheless, in 2020, the Council of Ministers approved the master plan to upgrade Dhangadhi Airport. Yet, since acquiring 258 bighas of land alone would cost 12 billion rupees against the total project cost of four billion, the project remains stalled. Since 2020, all tourism ministers have talked about upgrading airports, but none have been able to expand them.

Like Dhangadhi, the expansion projects of Nepalgunj and Biratnagar airports have not progressed due to the same land compensation issues. Expanding airports solely with the authority’s investment has become increasingly difficult. “The airport expansion projects could not progress because there is no budget allocation from the government,” says Hansaraj Pandeya, Deputy Director General of the Civil Aviation Authority of Nepal.

The challenge of land compensation is exemplified by a national pride project – Gautam Buddha Regional International Airport in Bhairahawa. The cost of land compensation has been more than three times the cost of constructing the airport’s physical infrastructure. While nine billion rupees were spent on building the airport’s physical structures, about 23 billion rupees were spent on acquiring land.

However, as Prabhuram Sharma, project chief of Gautam Buddha International Airport, explains, physical structures were built only on already acquired land, and land required for other airport services was acquired later.

Recently proposed projects have also faced difficulties in distributing compensation. Legal provisions require that when the state uses private land, compensation must be provided.

The Land Acquisition Act, 1977, stipulates that when land is required for public work, adequate compensation must be paid. Providing compensation to citizens when private land is used by the government is also a democratic principle.

However, due to the rising price of land, the government has been unable to provide compensation while also constructing key infrastructure projects. In some cases, such as the ten major national pride projects, the total cost is around 2 trillion rupees, while land compensation alone amounts to 413.11 billion rupees. This expenditure on compensation exceeds 20 percent of the total project cost.

Another example is the East-West electric railway, for which the government has long reserved privately owned land. The government has not been able to pay compensation for the reserved land. Because the land was frozen by the government, locals have been unable to sell their land or divide it among family members.

Rohit Bisural, former Director General of the Department of Railways, says the estimated cost of the 1,400-kilometer East-West railway is 1 trillion rupees. He estimates that 300 billion rupees would be spent on land compensation alone.

Some of the land required for the railway belongs to villages, so in comparison to the construction cost, the compensation amount seems small. However, the government has not been able to ensure the necessary funds for compensation.

Since there is no established practice of arranging land at the start of the project, the costs of both the project and compensation continue to rise daily. When the East-West railway project began, the estimated cost was 550 billion rupees. Now, the cost has doubled, according to Bisural.

The budget spent on land compensation could instead be used to build a new 1,500-megawatt hydropower project. In Nepal, the estimated cost of developing one megawatt of hydropower is on average 180 to 200 million rupees.

Bisural says, “Too much is being spent on compensation. But constructing only hydropower is not enough. The electricity generated will primarily be used by the railway. Therefore, addressing the problem of land compensation is essential.”

Work on the Kakadbhitta–Inaruwa section of the East-West railway has not been able to start because compensation has not been paid. Kiran Kumar Karki, project chief of the East-West Electric Railway, says the 104-kilometer section is estimated to require 30 billion rupees for land compensation.

According to Department of Railways data, for the 69-kilometer section of the electric railway from Bardibas to Choncha in Rautahat, compensation for 274 bighas of private land has cost 4.30 billion rupees. The government allocates barely one billion rupees per year for the electric railway, which is like sprinkling a small amount of water for a large project.

Another infrastructure project entangled in compensation issues is Pokhara International Airport. For its construction, 3,899 ropanis of land were acquired, costing three billion rupees.

Even though three billion rupees were spent on acquiring land for Pokhara Airport, the project took more time to obtain the land than to construct the airport. The initial estimated cost of the project was 14 billion rupees, but upon completion, it rose to 22 billion rupees.

The Pokhara Airport, built with Chinese loans, could not be completed without controversy. Due to suspicions of financial irregularities during construction, the Commission for the Investigation of Abuse of Authority (CIAA) has initiated an investigation. Earlier, a parliamentary subcommittee formed under the coordination of then-MP Rajendra Lingden had published a report concluding that there was 10 billion rupees of corruption in the airport’s construction. However, some members of that subcommittee expressed disagreement with the report’s findings.

Another national pride project is the Kathmandu–Terai Expressway. So far, 5.48 billion rupees have been spent on land compensation alone, according to Assistant Spokesperson Brigadier General Rajaram Basnet of the Nepal Army.

The land compensation issue has not yet been resolved for the starting point of the expressway in the Khokana area of Lalitpur, which is being constructed by the Nepal Army.

According to the Detailed Project Report, the total cost of this project is 211 brillion rupees. Basnet says, “Necessary land for the project has not yet been fully acquired. Coordination with the Ministry of Defense is ongoing for the acquisition of required land and policy decisions regarding compensation.” The physical progress of the expressway is 41.37 percent.

Large infrastructure projects are typically funded through loans from foreign donor agencies. These projects are designed so that the revenue generated can be used to repay the donor agency’s loan. However, the land acquisition process for project construction often takes a long time and consumes a significant portion of the budget.

Disputes arising from landowners withdrawing land and the vested interests of influential local actors often unnecessarily prolong compensation issues. Even in projects built with donor assistance, the Nepalese government must pay the land compensation.

When payments are delayed, affected locals sometimes obstruct project work, which prolongs the project timeline and increases costs. Ultimately, the government bears a greater financial burden.

Intermediaries inflate prices

Whenever a new infrastructure project is proposed, intermediaries quickly become active. Those with strong political connections buy local land at low prices and then inflate its value to claim higher compensation.

A prime example of this is the compensation issue for Gautam Buddha International Airport. After the government announced the airport project, locals initially refused to give their land and even opposed construction.

The main reason for this opposition was the opportunity to claim the highest possible compensation. Only after repeated disputes and protests by locals was the compensation finalized. Project chief Sharma says, “Only after locals protested 14–15 times was the compensation issue resolved. The District Chief Officer-led committee determined the compensation, published the notice in a national daily, and then the compensation was distributed.”

Initially, work on the terminal building, runway, and other structures at the airport began using the airport’s already acquired land, financed through a loan from the Asian Development Bank.

When discussions about building an international airport in Bhairahawa emerged, intermediaries quickly purchased land from locals and, using political influence, inflated its value so that the government paid higher compensation, benefiting the intermediaries.

Locals, citing irregularities in the compensation for Bhairahawa Airport land, filed a petition with the Public Accounts Committee on March 16, 2025. Petitioners claim that more than 13 billion rupees were misappropriated in land acquisition.

They allege that compensation was given in collusion, using fake relatives and rights holders, and that more land than necessary was acquired for the airport, creating a financial burden for the state. Under the leadership of then-MP Manju Khand, the Accounts Committee formed a subcommittee to investigate the construction of Gautam Buddha International Airport.

A similar situation occurred during the construction of the Nagdhunga Tunnel. Intermediaries bought land from locals in Dhading and Kathmandu that fell in the tunnel project’s path. Compensation of 15 million rupees per ropani was demanded. Intermediaries even used locals to create obstructions in the project.

Of the total construction cost of the Nagdhunga Tunnel, which is 22.82 billion rupees, about 6 billion rupees has been spent on land compensation, says project chief Saujanya Nepal. While arranging land for the tunnel, up to 4.2 million rupees per anna (unit of land) was spent.

Due to political pressure, compensation was paid at up to nine times the land’s actual value. Some locals in the project area still have not received compensation. Nepal explains that internal disputes among these locals are also a reason for the delay in collecting compensation.

Another reason for manipulation in compensation is the politically motivated hasty announcement of projects. Infrastructure projects announced for political gains, without preparatory work, benefit intermediaries and influential actors.

When a project is rumored to be coming, intermediaries buy land cheaply and, using political support, inflate its price to claim higher compensation. As a result, land compensation for large projects has become a burdensome issue for the state.

Infrastructure expert Dr. Surya Raj Acharya says, “There is a social psychology among locals in project-affected areas that the state can be exploited by demanding higher compensation. The acquisition of small and fragmented plots of land is also a cause of the problem.”

When developing projects, the biggest challenge is managing land and distributing compensation. Land management for large reservoir-based hydropower projects takes a significant amount of time. The longer a project’s construction is delayed, the higher its overall cost becomes.

The government has established a process requiring all preparatory work, including land acquisition, to be completed before awarding any project contract. However, projects are often stalled for long periods because necessary land cannot be arranged.

An example is the second phase of the Ring Road expansion. Because the site has not been cleared for expansion with the support of the Chinese government, the Chinese company has not started work.

Moreover, locals in Narayan Gopal Chowk and Gaushala demanded compensation and caused disputes, so construction proceeded only from Kalanki to Basundhara, says Prabhat Kumar Jha, Deputy Director General of the Department of Roads.

When the Ring Road was constructed in 1977, the boundaries on both sides were clearly defined, so the government claims no additional compensation is necessary. However, locals in Narayan Gopal Chowk and Gaushala claim they are entitled to compensation. This is why the Ring Road expansion has proceeded in segments.

Infrastructure expert and former Nepal government secretary Kishor Thapa says that to prevent pre-project obstructions, legal provisions must ensure that compensation cannot exceed the prevailing land value.

“Land mafias and intermediaries have increasingly demanded compensation by inflating land prices two or three times overnight. This creates additional debt for the state. To end this, the government must make strict policy decisions to pay not a single rupee more than the prevailing market value,” Thapa adds.

Without grants or loans from donor agencies, constructing large infrastructure projects is impossible. Most donor assistance comes as loans. For example, in March 2025, the Ministry of Finance wrote to the World Bank to request a loan for the Dudhkoshi hydropower project.

Because compensation issues delay the project start, these projects cannot be completed on time, and the state does not receive returns as scheduled. The donor loan burden also increases.

Former Vice-Chair of the National Planning Commission and newly appointed Governor, Biswo Poudel, says that a new law is needed to end the situation where infrastructure project costs become unnaturally high due to compensation issues.

He states, “When developing projects, too much time is spent on land acquisition. There are many examples where land prices were inflated overnight, and compensation was distributed accordingly. To solve this problem, the state needs to enact strict legislation.”

Stalled large projects

A large sum has been spent on compensation for the long-delayed, yet-to-be-built, much-discussed 1,200 MW Budhigandaki hydropower project in Gorkha. The project’s estimated cost is about 400 billion rupees. However, Budhigandaki Hydropower Company has already spent 44 billion rupees on land acquisition and still needs to acquire an additional 9,000 hectares.

According to CEO Jibachh Mandal, acquiring this additional land will cost another 10 billion rupees. With 54 billion rupees spent on land compensation alone, the project cost automatically rises.

Many other projects have been stalled due to compensation issues. For the national pride Kathmandu–Terai Expressway, 2.5 billion rupees have already been spent on land compensation.

Locals in Khokana and Bungmati, the starting points of the expressway, have still not received compensation. For the 6.4-kilometer stretch from Khokana to Dukuchhap, an additional 2 billion rupees are estimated to be needed for land compensation.

The Dudhkoshi reservoir-based hydropower project is also listed as a national pride project. The 670 MW project is estimated to cost 317 billion rupees. However, compensation disputes have stalled the project.

Dudhkoshi Hydropower Company estimates that 5 billion rupees will be required for land compensation. Without acquiring 30,000 ropanis of private land in the affected districts of Khotang, Okhaldhunga, and Solukhumbu, the project cannot proceed.

Another project stalled due to inability to raise compensation funds is the Tamor reservoir-based hydropower project. The 756 MW Tamor project is to be built by the Chinese company Power China. However, work cannot begin because land has not been arranged. It is estimated that 5 billion rupees will be required for compensation in this project as well.

Private landowners often consider their land to be the greatest source of lifetime income. When land is sold cheaply, there is a perception of losing one’s achievement, which leads landowners to demand higher prices.

Former Vice-Chair of the National Planning Commission Govindraj Pokharel says, “In Nepal, land is treated less as a means of production and more as capital, like shares or gold. That is why compensation has become expensive. If land is self-assessed and taxed according to type (agricultural, industrial, residential), acquisition becomes easier. If acquired by paying slightly above the market price, landowners are more likely to accept it willingly.”

Legal framework for compensation

There is a legal provision requiring fair compensation when private property is acquired. Even before formal laws, this practice was followed in practical terms since the Rana period. For the 500 kW Pharping Hydropower Plant, 324 ropanis of land were acquired in 1911. From this project onward, land acquisition for infrastructure began in Nepal.

Eleven years later, in 1922, 38 ropanis of land were acquired for the Sundarijal Hydropower Plant. Attempts to codify land acquisition in law began in 1956. That year, the Immovable Property Acquisition Act was enacted.

Subsequently, the Land Acquisition Act, 1969 and Land Acquisition Regulations, 1969 were issued. The latest legal document on land acquisition is the Land Acquisition Act, 1977.

The Land Acquisition Act, 1977 gives the committee led by the Chief District Officer the authority to determine the type and value of compensation.

Section 13 of the Act stipulates that a committee consisting of the Chief District Officer, Land Administrator, Project Chief, and representatives of the concerned rural municipality or municipality will determine the compensation value for acquiring land.

The law also mandates that landowners must be compensated for losses incurred during acquisition. Former Director General of the Department of Railways, Rohit Bisural, says, “There should be a separate authority with full powers solely for compensation. In most projects, those with influence at the local level dominate the compensation process, which drives up costs.”