Nepal, China sign loan agreement to procure sic aircraft for national flag carrier

The government is finally procuring two and purchasing four – a total of six aircraft from China – for national flag carrier.

Finance secretary Shanta Raj Subedi and Chinese ambassador to Nepal Wu Chuntai signed worth two agreements – Framework Agreement on Provision of Concessional Loan Assistance and Economic and Technical Cooperation Agreement for Grant Assistance – worth Rs 6.77 billion on behalf of their respective governments Today finalising the aircraft deal.

China will provide a grant of Rs 2.94 billion to procure a 19-seater Y-12e and a MA60 in grant, whereas China EXIM Bank will fund Rs 3.72 billion in soft loans to buy three Harbin Y-12e and a 58-seater Modern Ark 60 (MA60).

Nepal will have to pay an interest of 1.5 per cent per annum, apart from 0.4 per cent service charge and management expenses. China has also provided a seven-year grace period on the 20-year loan repayment deadline that will help the national flag carrier enjoy earnings for during that period.

"The NAC must now prepare the loan repayment schedule and commercial plan," said Subedi after the agreement.
Likewise, Chuntai, on the occasion, said that the new aircraft will help Nepal promote tourism.

The induction of new aircraft to the ailing Nepal Airlines Corporation (NAC) is expected to give the ailing national flag carrier a new lease of life as it has been left with only one aircraft for the domestic flight.

China has pledged to deliver the aircraft gradually within three month after today's agreement.

NAC is planning to operate the MA60 for mountain flights and other accessible destinations like Pokhara, Bhairahawa, Biratnagar, Dhangadhi, Nepalgunj and Simara, while Harbin Y-12e will be operated for mountain flights and other remote destinations.

The NAC is planning to increase its domestic market share to 40 per cent in seven years. However, NAC’s domestic market share has declined to less than five per cent due to lack of aircraft. The number of annual domestic passengers stands at 1.58 million, according to official data.

The loan agreement followed the Cabinet's decision on November 14 to allow China made aircraft to fly in the Nepali skies, though some of the aviation experts have still been doubting the China-made aircraft and its certification.