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China purchased aircrafts causes loss for Nepal's flag carrier

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Kathmandu | August 11, 2022 11:58:39 PM IST
A batch of six aircrafts purchased from China by Nepal Airlines has resulted in a huge loss as they remain defunct and rusting.

Imported with high hopes to fly to the remote and unserved sectors, three 17-seater Y12e and two 56-seater MA60 aircraft are gathering rust on the parking bay of Tribhuwan International Airport. A sixth crashed in Nepalgunj.

In November 2012, state-flag-carrier-Nepal Airlines Corporation (NAC) signed a commercial agreement with Aviation Industry Corporation of China (AVIC), a Chinese Government undertaking to procure the aircrafts.

China at the time had provided the grant and concessional loan assistance of 408 million Chinese Yuan, equivalent to Nepali rupees 6.67 billion.

Out of the total aid money, a grant worth 180 million yuan (Nepali rupee 2.94 billion) went to pay for one MA60 and one Y12e aircraft. The other aircraft were bought for 228 million yuan (Nepali rupee 3.72 billion) with a soft loan provided by China's EXIM Bank.

Soon after their arrival, the NAC board then realized that aircrafts need more cost to operate than to purchase and bring it, to Nepal. In July 2020, the NAC board decided to stop the operation of aircrafts and since has been kept in the Tribhuwan International Airport.

Though the planes are out of service due to high-cost operationalization and unfit to fly, the Ministry of Finance has started paying back the interest on the loans for the planes.

"Annual interest of 1.5 per cent and service charge and management expenses of 0.4 per cent of the overall loan amount needs to be paid. Two instalments has already been paid which includes the interest on the loans that were provided by EXIM Bank," Hira Neupane, spokesperson at the Public Debt Management Office of the Finance Ministry confirmed.

As per the November 2012 agreement, China had given a seven-year grace period under which Nepal Airlines would not have to pay interest and instalment payments. The payback period of the loan is 20 years or by March 21, 2034. The planes have completed the seven-year grace period privilege.

The first quarterly instalment of 10.9 million yuan (Nepali rupees 205.67 million) was sent in September 2021 while the second instalment was sent in March. The accumulated losses on the five Chinese planes have already crossed Nepali rupees 2 billion.

Before the planes were grounded, the total accumulated losses of these planes were Nepali rupees 1.9 billion, nearly half of the cost of the planes. With the planes grounded, the operating costs have dropped for Nepal Airlines, but it has to pay insurance premiums for the aircraft and parts. (ANI)

 
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