NAC to sign Rs 9.8b loan pact with EPF to buy aircraft

KATHMANDU, JUN 05 -

Nepal Airlines Corporation (NAC) is all set to sign a loan agreement with the Employees’ Provident Fund (EPF) for Rs 9.80 billion to buy two Airbus aircraft .

Once the deal is finalised, NAC will sign an aircraft purchase agreement with the European plane maker to formalise the memorandum of understanding (MoU) signed between them on April 6.

Last Thursday, a Cabinet meeting directed the EPF to sanction the loan. As per the decision, the EPF will release the funds under its own set conditions, which means it will keep the proposed jets as collateral. “The loan agreement will be signed this week,” said Ranjan Krishna Aryal, joint secretary at the Tourism Ministry. “The interest on the loan has been set at 12 percent per annum.”

EPF administrator Krishna Prasad Acharya said they were awaiting the Cabinet’s decision. “After we receive its okay formally, we will call a board meeting in this regard.”

According to Acharya, it will take at least two days to prepare a draft of the agreement after the board gives the go-ahead. “As all things are positive, hopefully the agreement will happen this week.”

Nepal’s venerable national flag carrier has been trying to expand its fleet for the last two decades, but something has gone wrong every time as if the plan was jinxed. Past aircraft purchase attempts have ended in fiasco with airline officials getting into trouble with anti-graft bodies, parliamentary committees and various ministries of the government over procedural lapses.

The carrier currently possesses two ageing Boeing 757s, and it has had to dump many of its lucrative routes due to lack of aircraft . “With the EPF ready to fund the project, it was necessary for NAC to get the government’s go-ahead for the loan agreement,” said NAC MD Madan Kharel. “There are still ways to negotiate the interest rate.”

According to Kharel, NAC has readied the paperwork to sign the aircraft purchase agreement with Airbus. “Right after the loan is finalised, we will be signing the purchase agreement.” As per the MoU, Airbus will deliver one of the two A320-200 aircraft in February 2015. The second one will arrive in March.

On Feb 11, the Cabinet gave the go-ahead to NAC to revive its old agreement with Airbus to purchase aircraft .

The Cabinet’s move came after the Supreme Court’s decision that the now-defunct Public Accounts Committee’s (PAC) order to the government to cancel the deal on Dec 28, 2009 was interference

in NAC’s matters, and that

the order did not hold any legality.

On Oct 26, 2009, the NAC board had decided to purchase two aircraft from Airbus to expand its international fleet. However, with controversy surrounding the purchase process, PAC had directed the government to cancel the deal. Subsequently on May 25, 2010, the Finance Ministry directed the Tourism Ministry to scrap the purchase process.

NAC’s share of the tourist market hit an all-time low of 2.3 percent last year. The carrier slipped to the 14th spot among the 29 international carriers serving Nepal.

Source: The Kathmandu Post