Airlines cartel in food transportation to rural areas

Published On: August 26, 2021 02:30 PM NPT By: Republica  | @RepublicaNepal

KATHMANDU, August 26: The government has been providing 1.5 million kilograms of rice annually through the Nepal Food Corporation (NFC) to the remote district of Humla in Karnali. Due to the lack of road networks, private sector airlines - Summit Air, Tara Air and Sita Air - have been involved in the transportation of rice.

Through the annual tender called by the NFC, these airlines have been transporting rice at mutually agreed rates. However, this time the NFC has invited tenders for the fiscal year 2021/22 involving not only the airlines but also the cargo companies. In response, these airlines are opposing the tender through their associations and various media.

Deputy General Manager of the NFC, Shreeraj Mani Khanal, said that every year, they have been inviting tenders so that all the airlines and cargo companies can participate. “But this time we have added that the participant should be registered to VAT as per the Public Procurement Act in the criteria. The airlines, on the other hand, need not be registered in the VAT system to operate so they cannot participate directly which is why they have shown dissatisfaction,” he said, “We have discussed and instructed the bodies concerned and amended the tender notice so that the rule does not apply to them.”

According to sources, the reason why the NFC has made VAT registration rule a mandatory condition for the tender of 2021/22 is due to the hesitant attitude of these airlines toward the corporation. A senior NFC official, seeking anonymity, said, “These airlines want to get the job for themselves and carry out the work as per their convenience.”

They don't pay attention to transporting rice until they get passengers for their flights. Even before the COVID-19 pandemic hit the country, we had to plead with the airline officials for the transportation of the rice. During the tourist season, all their aircraft are concentrated on carrying passengers. This causes a food crisis for months in Humla.”

Now that tourism activities are at halt due to COVID-19, the rice transportation is also the mainstay of the airlines to keep their business alive. Sources claim that the NFC is unwilling to work with the airlines.

The reason for this is said to be to break the cartel of these airlines in rice transportation and to get rid of the unnecessary political and administrative pressure exerted by these airlines on NFC.

According to sources at NFC, to participate in the tender, any cargo company has to submit a contract or agreement of the airlines it uses to transport rice. However, it has come to light that these airlines don’t give consent to such cargo companies and have been controlling the rates to get the cartel going.

Tara, Summit and Sita Air have been negotiating tenders every year and these three companies divide the quantity of rice to be transported among themselves. Thus, it seems that the practice of applying for tender in a planned manner by filling the same rate and providing rice for transportation to the other two by the winning airline has continued for some time.

In doing so, it seems that the transportation of rice is quick while all the three airlines are able to transport, but it is clear that these airlines have been controlling the rates and cartelling the tender for years.

All three airlines operate aircraft with three different weight capacities. And the fact that every time they quote the same rates in the tender makes it clear how they have maintained the cartel.


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