The Asian Development Bank (ADB) will provide an additional $25 million loan to the Government of Nepal to complete the Melamchi tunnel and help alleviate a severe water shortage in the Kathmandu Valley.

"Once completed, Melamchi tunnel will be a lifeline for the people of the Kathmandu Valley. The tunnel will not only bring the people of Kathmandu more clean water, but also support other downstream water supply and wastewater projects in the Kathmandu Valley," said Fei Yue, Director of the Urban Development and Water Division in ADB's South Asia Department.

According to a press release of Asian Development Bank, more than 2.5 million people of the Kathmandu Valley have long suffered from inadequate and unreliable clean water supplies and have resorted to bottled water, collecting rainwater, or drilling wells, leading to increasingly polluted wells and falling water in key aquifers. Insufficient clean water has also undermined public health in and around Nepal's capital.

ADB approved a restructured $137 million loan in February 2008 for the then $317 million Melamchi Water Supply Project but the completion was delayed by political and economic uncertainties in Nepal, changes to the project design, and, most recently, the need to find a new contractor to complete the tunnel construction.

ADB's additional funds, along with an extra $13.1 million from the Government of Nepal, means the overall cost is now estimated at $355.4 million.

Under the project, Cooperativa Muratori e Cementisti di Ravenna, an Italian construction firm, is contracted to complete the 27.5-kilometer Melamchi tunnel by the end of September 2016. The tunnel will take 170 million liters of water per day from the Melamchi River to Kathmandu.

A water treatment plant, financed by the Japan International Cooperation Agency, is under construction in Sundarijal on the outskirts of Kathmandu that will treat the water brought through the Melamchi tunnel.

In addition, improvements to the Kathmandu Valley water transmission and distribution network are under way with an $80 million ADB loan, made in 2011, to take water from the treatment plant to households and reduce water lost to leakages. ADB approved another $80 million loan in April 2013 to expand and rehabilitate the sewerage network and build wastewater treatment plants to deal with more than 90 million liters of wastewater per day in the Kathmandu Valley.

As part of the overall Melamchi project, ADB is also promoting reforms in Nepal's urban water sector including creating an independent water management board, setting up an independent commission to regulate water tariffs, and establishing an autonomous company for water and wastewater service delivery in the Kathmandu Valley.