NAC’s aircraft purchase process lands in controversy; allegation of commissions of Rs 180 million

Published On: February 26, 2024 08:11 PM NPT By: Dilip Paudel

KATHMANDU, Feb 26: The procurement process initiated by Nepal Airlines Corporation (NAC) for the acquisition of three aircraft, estimated at around Rs 3 billion, has sparked controversy.

Aircraft Industries of Czech Republic, India's Hindustan Aeronautics Limited and Canadian aircraft twin-otter manufacturer De Havilland Aircraft Company have submitted proposals to sell the aircraft in response to a tender called for by the NAC.

While the NAC's evaluation committee is yet to complete the assessment of the proposals, the aircraft procurement process has faced allegations of being driven by the lure of commissions. MP Ram Hari Khatiwada asserted during Sunday's session of the House of Representatives that the aircraft procurement process had commenced with the lure of Rs 180 million in commissions.

Khatiwada, chairman of the State Affairs and Good Governance Committee of parliament, said in the House of Representatives meeting on Sunday that they are going to purchase aircraft from companies that have stopped aircraft production. Khatiwada claims that the committee has called the report unqualified for procuring aircraft from such manufacturers.

"We have received information that they are planning to take about Rs 180 million in commissions by introducing an aircraft called 300G, which is not currently in production," Khatiwada stated during the session.

Ramesh Paudel, spokesperson for the NAC, said that the proposals received in response to the NAC's call for tender are currently under evaluation. "The technical proposals are being assessed by the committee," he said. "We cannot comment on the matter right now," he added.

NAC had decided to purchase three small aircraft to enhance air connectivity in remote areas. The NAC board initiated the aircraft procurement process by forming a seven-member sub-committee, chaired by senior captain Sudhir Shamsher Rai, a board member.

The NAC is planning to purchase aircraft capable of operating in hilly terrains and performing short take-offs and landings. To finance this acquisition, the NAC intends to divest its shares in Soaltee Hotel and procure three small aircraft for about Rs 3 billion.

The aircraft are going to be purchased based on the suggestions given by the structural and managerial study and recommendation committee of the NAC. The market value of a twin-otter that the NAC intends to buy is around Rs 1 billion. The NAC currently has only two TwinOtter aircraft for domestic flights.

The NAC is planning to buy not only domestic but also big aircraft for international flights. The NAC has already invited proposals for subsidized loans worth Rs 125 billion. The NAC has started the process of taking Rs 135 billion 'soft loan' (concessional loan) from international financial institutions.

The NAC has called on international financial institutions for concessional loans of about 1,018 million US dollars for financial management and purchase of new aircraft.

The NAC has to repay about Rs 48 billion of loans taken from the Employee Provident Fund and Citizen Investment Fund. The NAC took a loan from these institutions to buy an Airbus aircraft. The NAC has sought a loan of Rs 55 billion to manage the debt of buying Airbus, Rs 75 billion to buy a new aircraft, and Rs 5 billion for the hangar construction.

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