NAC move sees a revival

Govt mulls forming high-level body to handle aircraft purchase for national carrier

SANGAM PRASAIN
KATHMANDU, OCT 30 -

Nepal Airlines Corporation’s latest plan to enlarge its fleet, which has bogged down in controversy like many times before, has regained pace after a 10-month lull with the government mulling forming a high-level body to handle the procurement.

The new move, initiated by the Ministry of Finance, has been brought forward as repeated efforts to purchase aircraft for the national flag carrier have ended in dispute. With Nepal Tourism Year 2011 round the corner, NAC is in dire need of additional planes. The Finance Ministry says it is ready to provide a guarantee for the aircraft procurement, but its only concern is that the process should be transparent and that the aircraft should fulfil NAC’s requirement.

The government, according to a senior Finance Ministry official, has dropped the plan to purchase wide-body aircraft. “Now, two narrow-body planes will be purchased for NAC,” said the official. “There is broad consensus on a narrow-body jet.”

However, the new process will move forward only after the Commission for Investigation of Abuse of Authority (CIAA) gives the final verdict on the aborted Airbus deal. The CIAA is currently at the final stage of its investigation into the Airbus purchase plan and is expected to give its final decision soon. It had seized all the documents related to the proposed aircraft purchase in the second week of August.

NAC’s plan to acquire two new aircraft stalled when the parliamentary Public Accounts Committee (PAC) directed the government to cancel the Airbus deal in December 2009 citing violation of the law governing public purchase. The NAC board had decided to purchase two aircraft from Airbus on Oct. 26 to enlarge its international fleet. In its proposal, Airbus had quoted US$ 41.28 million (Rs. 3.08 billion) for a narrow-body aircraft and US$ 92.84 (Rs. 6.93 billion) for a wide-body aircraft.

Apart from PAC, the Finance Ministry had also instructed the Ministry of Tourism and Civil Aviation to dump the purchase plan. In May 2010, the Finance Ministry had written to the Tourism Ministry that it would be unable to provide a guarantee for the loan required to purchase the aircraft and had asked it to scrap the planned purchase and initiate work to recover the commitment money sent to Airbus.

With its attempts to acquire aircraft having proved futile, the government is now thinking of forming a high-level body to procure aircraft for NAC. The Finance Ministry is of the view that an independent body would be the best option, given the controversy over the aircraft purchase. The Council of Ministers recently asked the Tourism Ministry to submit a proposal regarding a new purchase process.

“The Finance Ministry is willing to provide a government guarantee if the new procurement process is acceptable to them,” said Kishore Thapa, secretary at the Tourism Ministry. The new budget, according to Finance Ministry sources, will contain a specific arrangement in this connection. “If things go as planned, NAC will get two narrow-body aircraft by the middle of 2011,” Thapa said. He said that the two aircraft would operate on routes to the northern and southern neighbours considering their huge outbound potential. Nepal has signed Air Service Agreements with 36 countries as of now. However, the limited fleet of the national carrier has been unable to tap the market potential. The weak presence of the national flag carrier in the international arena has prompted many international airlines to start service to Nepal.

“We’re losing millions in foreign currency as NAC doesn’t have sufficient aircraft for international routes,” said a Finance Ministry official.” The international airlines serving Nepal are making a lot of money.” The international airlines flying to Nepal are doing good business carrying over two million passengers annually. “There is also a need for wide-body aircraft as the movement of Western tourists has been increasing each year. However, a narrow-body plane would also be fine with the country celebrating NTY and the national flag carrier being short of aircraft,” said Ram Kazi Koney, a travel trade entrepreneur.