The total capital cost of the project is estimated to be Rs68bn ($1.07bn), which includes land acquisition, rehabilitation, associated pre-construction activities and maintenance and operation cost of tunnel for four years.
Civil construction of the project will cost around Rs49bn ($773m).
After completion, the new tunnel will provide all weather connectivity between Srinagar and Leh and reduce the journey time to 15 minutes from the existing 3.5 hours.
Ministry of Road Transport & Highways (MoRT&H) will implement the project through National Highways & Infrastructure Development (NHIDCL).
The project involves the construction of 14.15km-long two-lane bidirectional single tube tunnel with a parallel 14.2km-long egress tunnel excluding approaches between Baltal and Minamarg.
The construction of approaches to this tunnel will be carried out separately.
Currently, another 6.5km long Z-Morh tunnel at Gagangir is also being built to facilitate traffic movement between the two regions of Kashmir and Ladakh.
The new project is expected to create significant job opportunities in the state and support local businesses after completion.
In another development, the union cabinet of India also approved the signing and implementation of the memorandum of understanding (MoU) between its Ministry of Road Transport & Highways and Transport for London (TfL).
Under the MoU, the two entities will work to improve overall public transport system in the country.