A high-ranking MOF official told myrepublica.com that the ministry has come to the conclusion that present status of Nepal Airlines Corporation (NAC) is an outcome of its mismanagement and it is worthless to provide guarantee unless its core problems are addressed.
Ministry of Tourism and Civil Aviation (MOTCA) forwarded a letter to MOF this week, requesting the latter to provide government guarantee on the loans worth $13 million that the NAC is planning to take from Employees´ Provident Fund (EPF).
EPF, which is the largest non-financial lender with deposits of around Rs 60 billion, has already agreed in principle to extend loan to the financially ailing NAC, but has demanded government guarantee for repayment as a key condition.
In the same letter, the MOTCA has also requested the finance minister to use his influence to lower lending rate that the EPF has proposed. According to the official, EPF has demanded 10 percent lending interest rate on the proposed loan worth $130 million to NAC. The official, however, made it clear that the finance ministry is not going to interfere in the lending rate as it was a pure business deal between NAC and EPF.
The finance ministry is of the view that the current NAC management is competent enough to bear the financial liability of the purchase of the aircraft. There is a need of putting professional management with sound track record of handling airlines business in place before deciding to provide government guarantee for the loans, said the official.
Earlier, the executive committee of NAC had decided to purchase two aircraft from Airbus, the European manufacturer, at the cost of around $134 million. The committee had settled on one plane in the A320-200 series, at a cost of $41.289 million, and one in the A330-200 series, at $92.845 million. The proposed wide-body A330-200 has a seat capacity of 279, while the narrow-body A320-200 has a seat capacity of 150.
The national flag carrier has been under fire for a long time as the two planes that it has for international flights are grounded frequently due to technical failures.The NAC has also been losing customers´ trust even as more and more airlines are making their way to Nepal.
PPMO concerned on procurement process
Public Procurement Monitoring Office (PPMO) has sought clarification from Nepal Airlines Corporation (NAC) over its initiatives to procure aircraft without amending its procurement bylaw as per the Public Procurement Act (PPA).
Expressing its concern in writing to the national flag carrier, the office also sought information on the process it is following for the procurement. Such action from the PPMO came as NAC has not yet harmonized its internal procurement bylaw with the PPA.
The PPA was enacted in 2007 and as it supersedes all past procurement laws, the PPMO had asked all public enterprises (PEs), including NAC, to amend their procurement bylaw to match with the PPA and inform the same to the office as well. However, only 10 PEs have informed the office about the amendment. NAC is one of the defaulters.
“Our main concern in the case is whether NAC has complied with the prevailing law. If it has not, the whole of the procurement process will be legally invalid,” a source at the office told myrepublica.com.
And the office doubt over NAC abiding by the law, especially as it has not uploaded its bid invitation notice on its website and also on the site of PPMO -- something which is made mandatory going by the PPA.
However, the soft-worded letter of PPMO does not reflect this concern. Instead it has asked the NAC management to notify the office if it has already amended its procurement bylaw immediately, so that it could conveniently monitor the procurement process of the company.
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