NAC's jet purchase plan hits snag over foreign exchange

KATHMANDU, JUL 09 -

Nepal Airlines Corporation (NAC) is scrambling to send the first instalment of the payment for the two Airbus aircraft it has ordered after the central bank refused to provide it foreign exchange facility. According to Tourism Ministry officials, Nepal Rastra Bank (NRB) has asked NAC to get the Finance Ministry’s approval first.  

On June 27, NAC confirmed its order for two Airbus A320-200 jets by signing an aircraft purchase agreement with the European plane maker. Under the deal, the national flag carrier had pledged to send the first instalment (8 percent of the catalogue price) within the next five working days. The first instalment amounts to US$ 14.7 million.

Ministry officials said that the payment deadline expired on July 4. NAC has borrowed Rs 10 billion from the Employees’ Provident Fund (EPF) to expand its fleet. The carrier has not been able to buy a plane since 1978.

“NAC has requested Airbus for an extension of the deadline,” said ministry officials. They added that Airbus would start the manufacturing process only after it receives the advance money. “This could delay the delivery of the jets.” As per the agreement, Airbus will deliver the first aircraft in February 2015 and the second in April. 

Meanwhile, an NRB source said that the exchange facility had not been given because NAC had not submitted all the necessary paperwork. “We have asked NAC to fulfil the entire process that includes obtaining the Finance Ministry’s consent and submitting the decision of its board to send the instalment,” said the official. “NAC has to observe the foreign exchange laws.”

However, Tourism Ministry officials said that NAC would not need the Finance Ministry’s go-ahead as the government is acting as guarantor for its fleet expansion project. On May 30, a Cabinet meeting directed the Finance Ministry to sanction a loan for NAC to procure jets.

A senior official of the Finance Ministry said that the foreign exchange is generally available based on the recommendation of the ministry concerned.

Nepal’s venerable airline has been trying to expand its fleet for the last three and a half 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.

Source: The Kathmandu Post