Scrap Airbus deal: PAC orders govt

KATHMANDU, Dec 28: The Public Accounts Committee (PAC) of the parliament on Monday directed the government to scrap the deal the Nepal Airlines Corporation (NAC) entered with Airbus saying that the corporation had signed the deal flouting the existing procurement law. [break]

PAC has also instructed the government to immediately re-initiate the aircraft procurement process, but asked it to assess the corporation´s capacity and needs prior to that and make procurement in a transparent manner.

The decision of the PAC has straightaway subjected the corporation to a loss of US$ 750,000 that it paid to the European aircraft manufacturing giant as a commitment amount for buying a narrow body and a wide body aircraft.

Terminate Airbus deal

Punish NAC management for unauthorized payment of US$ 0.75m

Initiate fresh bid to buy aircraft immediately

MoF to implement, monitor procurement

Reform NAC, make procurement transparent

“It was non-refundable, hence, NAC will not be able to get it back,” stated a senior official at the corporation, requesting anonymity. The corporation had paid the amount to confirm that it would go ahead with the deal.

However, a PAC probe had unearthed that the NAC management had made the payment without securing due authority from the board of directors. It has instructed the government to take action against the NAC executive team on charges of abuse of authority.

“Payment of lock-up money, which has inflicted a huge loss to the corporation, was a case of gross abuse of authority. We direct the government to initiate action against the NAC management for making payment even before arranging the fund required for materializing the deal,” reads the PAC verdict.

For the deal, NAC had planned to take Rs 10 billion in loans from the Employment Provident Fund (EPF). However, the ball had landed in the government´s court after EPF stipulated government guarantee as a pre-requisite for pledging the loans to the highly inefficient national flag carrier.

In its decision, PAC, nonetheless, has acknowledged the immediate need for buying aircraft to enable NAC to run its business and also to make Visit Nepal year 2011 successful.

In this connection, it has instructed the government to re-initiate the bidding process for acquiring the much-needed aircraft as soon as possible. “However, prior to starting the process, we direct the government to first identify the size and types of aircraft needed to serve NAC´s requirements,” says the decision.

It has also asked the government to end the situation of two chief executive heads in the corporation and reform its management.

Since government guarantee from Ministry of Finance is very necessary to seal the procurement deal, PAC has instructed MoF to implement and monitor the fresh procurement bid. It has also sought total transparency and legal compliance in the fresh process.

milan@myrepublica.com