The 8.2 kilometres long tunnel, which will initially have a rail track and could meet the needs of the next 20 years, could be converted into a highway at a later stage. It will also provide an alternative route from Chitral to Gilgit.
Earlier, addressing a large gathering at Chitral polo ground, the President announced various development projects for the district and adjoining areas and promised that people of the Northern Areas would get more than their due share.
"Northern Areas remained underprivileged and neglected in the past because past leadership had no regard for the poor, nor they had money as they plundered the national exchequer," he said.
President Musharraf announced a sanction of Rs 50 million to upgrade the Gilgit-Chitral road, and another Rs 20 million for the construction of a bridge on River Mastooj.
Funds would be provided for hydropower project on River Chitral, the President said, adding the government was launching two mobile utility stores to provide foodstuff and other items to people at cheaper rates. The President said the government had also written off agriculture loans of Rs 160 million to the benefit of some 6000 people of the area.
The President announced a plan to link Northern Areas with Central Asian Republics through Chitral and China. A feasibility study for the mega project would soon be undertaken, he added. He also allocated Rs 100 million separately for other smaller development schemes for the area. He said the Parliament, for the first time in the country's history, would complete its tenure, and the next general elections would be held in 2007.