The cabinet committee on economic affairs yesterday approved the draft commercial contract to build a two-lane tunnel underneath Karnaphuli river.
The committee approved the proposal of the Bridges Division in a meeting at the parliament with Industries Minister Amir Hossain Amu in the chair.
Under the contract, China Communication Construction Company (CCCC) will get $706 million for its services, 20 percent of which will have to be paid before the company begins work on the project.
The amount will have to be paid as per the project's schedule and 85 percent of the amount in foreign currency.
The government will borrow the entire amount to finance the builder from the Chinese Exim Bank under a state-to-state arrangement.
The cost of borrowing will be lower than the commercial rate; but as per conditions, the Chinese government nominated CCCC to get the work.
The total project outlay will cross $1 billion, which would be lower than the costs incurred to build tunnels in Canada, Japan and China, according to the Bridges Division.
The cost to build a kilometre of the Karnaphuli tunnel would be $103.67 million, based on amount to be paid to the Chinese builder.
However, a Bridges Division official said if the total cost of the project is taken into consideration, the cost per kilometre would be $144.63 million.
Canada's Ottawa Tunnel cost $143.50 million a kilometre, Japan's Tokyo Bay Aqua-Line $361 million and China's Yantai-Dalian Tunnel $146 million.