A task force has recommended the government to privatise the national flag carrier, apart from proposing immediate reform measures in 13 areas.
The report also recommended divestment of 49 per cent of Nepal Airlines Corporation (NAC) shares to Nepali and foreign investors and the public. The report has also suggested renaming NAC as Nepal Airlines Company Pvt Ltd, where the government would have 51 per cent stake, float 35 per cent shares for foreign or Nepali investors, 1.5 per cent shares for NAC staffers, 1.5 per cent for civil servants, six per cent for tourism entrepreneurs and five per cent for the public.
“NAC is operating under the Nepal Airlines Act-1962, while a lot has been changed in the aviation sector since last five decades,” former tourism secretary and coordinator of the task force – formed by the government on August 7 to bring reforms in NAC – Sushil Ghimire said, explaining the reason for the NAC’s inability to adapt to the changes. “NAC’s operation modality needs to be changed to make it competitive and commercially viable.”
Former tourism secretary Sushil Ghimire lead the team that includes chartered accountant (CA) Subodh Kumar Karna, management consultant Dim Prasad Poudel, captain Sudhir Sumsher Rai, and the tourism ministry’s joint secretary Buddhi Sagar Lamichhane.
Ghimire – submitting the report to the Ministry of Culture, Tourism and Civil Aviation today also said that the national flag carrier should uphold its corporate social responsibility (CSR), even if it is transformed into a profit-oriented company. “NAC should be operated under public-private partnership model,” he added.
The Ghimire-led committee is the seventh in two decades. Earlier too, many studies have been conducted and they have also recommended privatisation of NAC but the successive governments have not yet dared to reorganise the ailing government entity.
However, tourism minister Yogesh Bhattarai – speaking at a press conference after receiving the report from the task force – directed the ministry to take action based on the recommendations by setting a timetable.
The NAC – which is on the brink of bankruptcy due to debts and a poor operation plan – has been facing financial crisis and the report has recommended the ministry to bring help the government entity to improve its financial health. According to the report, NAC’s total loss stands at Rs 5.21 billion, while has a debt burden of Rs 40 billion. “Its total assets amount to Rs 3.60 billion.”
NAC has failed to pay its installments for the last three quarters due to deepening financial crisis. But the report also suggested the government to renegotiate NAC’s interest rate as it is higher than the market rates. It has been paying an interest of Rs 3 billion annually to its lenders. “Lenders' investments are at risk since the corporation has already defaulted on three instalments,” according to the report.
NAC lenders – the Employees’ Provident Fund (EPF) and Citizen Investment Trust (CIT) – are state-owned entities but they have levied a high interest rate of 10.50 per cent, though the current market interest rate revolves around 6 per cent to 7 per cent.
Apart from recommending the NAC to conduct sector analysis, improve its fleet and flight management, the report has also urged to focus on human resource management as the national flag carrier lacks manpower. “The NAC has neither been able to offer attractive wages to new recruits nor has it given good raise to its current staff due to ailing financial condition,” the report reads, suggesting NAC to utilise information communication technology (ICT), conduct due diligence audit, upgrade its accounting system into Nepal Financial Reporting Standard (NFRS), analyse performance indicators, invest more in infrastructure including transit cargo store, passenger transit hall, hangar, helicopter service, catering services and establish flight training institutes.
Recommending the corporation to immediately add two Airbus 320 aircraft to fly to newly-identified destinations, the report asked the NAC to find out suitable destinations through sector analysis. “The additional aircraft will add flight frequency in the destinations where the NAC is making profit, and operate flights to NAC-identified destinations Riyadh, Seoul, Beijing, Shanghai, Tokyo, and Australia where the passenger flow is high,” the report reads, suggesting the NAC to procure aircraft directly from manufacturer as it maintains transparency and makes the work easier. “The NAC should include a representative of the government or the Finance Ministry in the NAC’s committee while negotiating to procure aircraft.”
The first report – prepared by a high-level committee led by former chief secretary Damodar Prasad Gautam in February 2002 – had also suggested purchasing aircraft directly from the manufacturer to prevent financial irregularities.
Another report by a committee – in August 2002 – led by economist Shankar Sharma had also suggested to either give 60 per cent shares to a foreign strategic partner and the rest was to be divided between NAC (10 per cent), tourism entrepreneurs (10 per cent), corporation employees (5 per cent) and public (10 percent), or dissolve the corporation, establish a new company and then allocate 60 per cent shares to a foreign airline.
Likewise, a report prepared by the International Civil Aviation Organisation (ICAO) in September 2004 had suggested a parent-subsidiary model. The parent company would look after international operations while the subsidiary would look after domestic operations. It had also suggested to gradually privatise the NAC.
In January 2010 too, another committee led by joint secretary at the Tourism Ministry Murari Bahadur Karki, suggested a company model, with 51 per cent shares going to the management partner and 49 per cent to the government.
The report also recommended divestment of 49 per cent of Nepal Airlines Corporation (NAC) shares to Nepali and foreign investors and the public. The report has also suggested renaming NAC as Nepal Airlines Company Pvt Ltd, where the government would have 51 per cent stake, float 35 per cent shares for foreign or Nepali investors, 1.5 per cent shares for NAC staffers, 1.5 per cent for civil servants, six per cent for tourism entrepreneurs and five per cent for the public.
“NAC is operating under the Nepal Airlines Act-1962, while a lot has been changed in the aviation sector since last five decades,” former tourism secretary and coordinator of the task force – formed by the government on August 7 to bring reforms in NAC – Sushil Ghimire said, explaining the reason for the NAC’s inability to adapt to the changes. “NAC’s operation modality needs to be changed to make it competitive and commercially viable.”
Former tourism secretary Sushil Ghimire lead the team that includes chartered accountant (CA) Subodh Kumar Karna, management consultant Dim Prasad Poudel, captain Sudhir Sumsher Rai, and the tourism ministry’s joint secretary Buddhi Sagar Lamichhane.
Ghimire – submitting the report to the Ministry of Culture, Tourism and Civil Aviation today also said that the national flag carrier should uphold its corporate social responsibility (CSR), even if it is transformed into a profit-oriented company. “NAC should be operated under public-private partnership model,” he added.
The Ghimire-led committee is the seventh in two decades. Earlier too, many studies have been conducted and they have also recommended privatisation of NAC but the successive governments have not yet dared to reorganise the ailing government entity.
However, tourism minister Yogesh Bhattarai – speaking at a press conference after receiving the report from the task force – directed the ministry to take action based on the recommendations by setting a timetable.
The NAC – which is on the brink of bankruptcy due to debts and a poor operation plan – has been facing financial crisis and the report has recommended the ministry to bring help the government entity to improve its financial health. According to the report, NAC’s total loss stands at Rs 5.21 billion, while has a debt burden of Rs 40 billion. “Its total assets amount to Rs 3.60 billion.”
NAC has failed to pay its installments for the last three quarters due to deepening financial crisis. But the report also suggested the government to renegotiate NAC’s interest rate as it is higher than the market rates. It has been paying an interest of Rs 3 billion annually to its lenders. “Lenders' investments are at risk since the corporation has already defaulted on three instalments,” according to the report.
NAC lenders – the Employees’ Provident Fund (EPF) and Citizen Investment Trust (CIT) – are state-owned entities but they have levied a high interest rate of 10.50 per cent, though the current market interest rate revolves around 6 per cent to 7 per cent.
Apart from recommending the NAC to conduct sector analysis, improve its fleet and flight management, the report has also urged to focus on human resource management as the national flag carrier lacks manpower. “The NAC has neither been able to offer attractive wages to new recruits nor has it given good raise to its current staff due to ailing financial condition,” the report reads, suggesting NAC to utilise information communication technology (ICT), conduct due diligence audit, upgrade its accounting system into Nepal Financial Reporting Standard (NFRS), analyse performance indicators, invest more in infrastructure including transit cargo store, passenger transit hall, hangar, helicopter service, catering services and establish flight training institutes.
Recommending the corporation to immediately add two Airbus 320 aircraft to fly to newly-identified destinations, the report asked the NAC to find out suitable destinations through sector analysis. “The additional aircraft will add flight frequency in the destinations where the NAC is making profit, and operate flights to NAC-identified destinations Riyadh, Seoul, Beijing, Shanghai, Tokyo, and Australia where the passenger flow is high,” the report reads, suggesting the NAC to procure aircraft directly from manufacturer as it maintains transparency and makes the work easier. “The NAC should include a representative of the government or the Finance Ministry in the NAC’s committee while negotiating to procure aircraft.”
The first report – prepared by a high-level committee led by former chief secretary Damodar Prasad Gautam in February 2002 – had also suggested purchasing aircraft directly from the manufacturer to prevent financial irregularities.
Another report by a committee – in August 2002 – led by economist Shankar Sharma had also suggested to either give 60 per cent shares to a foreign strategic partner and the rest was to be divided between NAC (10 per cent), tourism entrepreneurs (10 per cent), corporation employees (5 per cent) and public (10 percent), or dissolve the corporation, establish a new company and then allocate 60 per cent shares to a foreign airline.
Likewise, a report prepared by the International Civil Aviation Organisation (ICAO) in September 2004 had suggested a parent-subsidiary model. The parent company would look after international operations while the subsidiary would look after domestic operations. It had also suggested to gradually privatise the NAC.
In January 2010 too, another committee led by joint secretary at the Tourism Ministry Murari Bahadur Karki, suggested a company model, with 51 per cent shares going to the management partner and 49 per cent to the government.
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