Just four days ahead of the Constituent Assembly election, the Cabinet on Thursday gave its go-ahead for the government to sign loan and grant agreements with China to procure six aircraft for the national flag carrier. Presently, the ailing Nepal Airlines Corporation (NAC) has a single aircraft in its domestic fleet.
China has pledged a 19-seater Harbin Y-12e and a 58-seater MA60 (Modern Ark 60) turboprop planes in grant, and the government plans to buy four more aircraft — three Harbin Y-12e and an MA60 — taking soft loans from the China EXIM Bank.
As per the agreement reached during the negotiation between the officials of the two governments, China will provide a grant of RMB 180 million (Rs 2.98 billion) for procuring a Y-12e and a MA60, while the China EXIM Bank will provide soft loans worth RMB 218 million (Rs 3.61 billion) to purchase the four aircraft.
According to Communi-cations and Information Minister Madhav Prasad Poudel, the Cabinet approved the proposal of the government-led negotiation committee, in which China has pledged providing some aircraft in grant and some under soft loans.
The Nepali negotiation committee was led by Ranjan Krishna Aryal, joint-secretary of the Ministry of Culture, Tourism and Civil Aviation, and included representatives from the Finance, Foreign Affairs and Law Ministries and the Nepal Rastra Bank.
The negotiation started on Nov 7 following the issuance of the type-certificate to Chinese-made MA60 aircraft On October 22, allowing the plane to enter the Nepali skies for the first time for civilian transport. The Finance Ministry then had fast-tracked the process of signing loan and grant agreements with China.
According to Aryal, China has agreed to provide soft loans at 1.05 percent interest. Nepal had been receiving soft loans at 1.75 percent interest from China EXIM Bank.
The Chinese side also accepted Nepal’s proposal to provide a seven-year grace period for loan repayment. “This will allow NAC to enjoy earnings for at least seven years,” said Aryal. “NAC has to repay its loan and interest in 13 years on installment basis.” Earlier, in the commercial agreement with NAC held on November 29, 2012, the Chinese side had offered a five-year grace period.
The negotiation committee also reduced the management cost and service charge to the China EXIM Bank to 0.22 percent from the proposed 0.55 percent.
“The major outcome of the negotiation was the reduction in the aircraft’s price to RMB 218 million from the earlier proposed RMB 228 million,” Aryal said. “It has saved Rs 180 million for NAC.”
Officials said China will deliver the first aircraft in the next two and half months. Tourism ministry officials said the aircraft manufacturer has already taken the livery and other designs of NAC.
After the Cabinet’s approval, the government will now move ahead with the process of signing formal loan, grant and other technical cooperation agreements. Officials said all the procedures will be completed by November.
On November 29, 2012, NAC had signed a commercial agreement with the AVIC International Holdings, a Chinese government undertaking, to procure the six aircraft. An understanding was reached that the NAC will receive two aircraft in grant within two months after finalizing the loan agreement, and the rest after five months of the first delivery.
On August 7, 2011, NAC had written to the Finance Ministry, requesting it to purchase eight aircraft under foreign grants. In November, the ministry requested China to provide aircraft either in grant or under soft loans. The Chinese side responded positively, expressing their readiness to provide some aircraft in grant and some under soft loans.
Subsequently in December 2011, the Chinese government formally informed the Finance Ministry that three aircraft would be provided to the NAC in grant and the others under soft loans. However, the plan was later revised.
source: The Kathmandu Post, 14 NOV 2013