Govt formally requests China EXIM Bank for loan
KATHMANDU, DEC 23 -
The Ministry of Finance has formally dispatched a letter to the China EXIM Bank requesting soft loans for the purchase of four Chinese aircraft for Nepal Airline Corporation (NAC).
China has pledged to provide a 19-seater Harbin Y-12e and a 58-seater MA60 turboprop in grant and the government plans to purchase four other aircraft—three Harbin Y-12e and an MA60—by taking the soft loans from the bank. “We sent a formal request letter to the China EXIM Bank a few days ago,” said Finance Secretary Shanta Raj Subedi. “Formal negotiations will take place after we receive the bank’s response.”
Subedi, however, said the request was sent after the Chinese side agreed to extend soft loans for the purpose during a recent meeting. If the plan materialises, the national flag carrier will get new aircraft in 25 years.
After receiving the Chinese bank’s response, the government will form a loan negotiation team led by a joint secretary of the Tourism Ministry, according to Subedi.
According to Subedi, the team will finalise the terms of negotiation and ascertain the actual amount required to fund the aircraft purchase. “First, the two government will sign an agreement and then a subsidiary agreement will be signed with the bank,” he said.
Earlier, the Chinese government had planned to include the two aircraft in its annual grant to Nepal. “But after the Finance Ministry refused to entertain such an idea, the aircraft will not be included in the annual Chinese grant, but will be a separate grant,” said a senior Finance Ministry official. China has been providing annual grant of 150 million Yuan to Nepal. The interest of the loan has not been fixed yet, but Nepali officials expect it will be less than 1.75 percent per year.
As per the commercial agreement signed between the NAC and AVIC International Holding, a Chinese government undertaking, on November 29, the Chinese side has given a five-year grace period for the loan and interest repayment. The provision will enable NAC to enjoy earnings for at least five years.
If things go as planned, NAC will receive the first delivery of the two aircraft in grant within two months after the loan agreement, according to NAC officials. Rest of the deliveries is expected within five months after the first delivery.
On August 7, 2011, NAC had written to the Finance Ministry, requesting it to purchase eight aircraft in foreign grant. And in November 2011, the ministry requested China to provide aircraft either in grant or on concessional loans. The Chinese side then responded positively, expressing their readiness to provide some aircraft in grant and some under soft loans.
An NAC technical team, following its inspection visit to China, reported the airplanes were fit for the Nepali skies. Subsequently in December 2011, the Chinese government formally informed the Finance Ministry that three aircraft would be provided to NAC in grant and the others on soft loans.
However, the process landed in controversy, with the Commission for Investigation of Abuse of Authority being called to probe alleged irregularities. The government again revived the plan on October 17, 2012, under its Immediate Governance and Economy Reform Action Plan 2012.
Source: The Kathmandu Post
