Government vows to review Social Security Fund guidelines

After repeated complaints from employers, employees and other stakeholders on some provisions in the Social Security Fund (SSF), the government has finally agreed to review the guidelines within three months.
Addressing the ‘Econ-ity’ discussion on ‘Understanding the Social Security fund: Opportunities and Challenges,’ organised by Samridhhi Foundation, here today, executive director of the Social Security Fund Kapilmani Gyawali said that the government is going to make amendments of the provisions that the employers, employees and stakeholders have been seeking.
There have also been complaints that the guidelines discriminate between public and private sector employees and that participants in the fund will have to actually pay double taxes. Likewise, stakeholders have also criticised the policy as both workers and employers seem to be reluctant to participate in the social security programme.
Gyawali, however, said that the government is going to make amendments as the fund has been receiving widespread criticism due to the lower benefits it offers and unprofitable provisions. “We are going to hire a group of ‘actuaries’ from abroad, who will look into the issues being raised by different stakeholders and will make adjustments to the facilities that will be provided by the fund,” he said, adding that the provision related to insurance and taxation will also be revised. “We will come up with arrangements that can be easily integrated into the fund.”
An actuary is a business professional, who deals with the measurement and management of risk and uncertainty. Saying that Social Security Fund is working on solving the issue of taxation also, Gyawali said that the government is ready to amend the law after objections were raised regarding the age limit of retirement and insurance arrangements being unrealistic and the fund being discriminatory between public and private sector employees.
Speaking on behalf of Nepal Bankers Association (NBA) chief executive officer of Agriculture Development Bank Anil Sharma said that they have observed some contradictory provisions in the Act. As a representative of the private sector, he believes that there is a need to discuss on the Act itself. “The scheme should be sector-specific based on the varying needs and capacity of different sectors or the same for all sectors,” he said, agreeing on the fact that a lot of shortcomings need to be handled addressing all the issues in order to achieve positive outcomes.
Likewise, vice president of Confederation of Nepalese Industries (CNI) Rajesh Agrawal, on the occasion, stressed on the need to balance the schemes in regards to varying sectors. He also ensured that CNI has also raised voices for the small and medium enterprises (SMEs) and not just the large corporations. He further ensured that they will address the needs of the SMEs in the social security scheme in the days to come.
Discussing on various frameworks in regards to the contribution based social security scheme, the participants delved into the emerging trend with the implications of the recent developments and benefits that will accrue the people from different sector. Likewise, the programme attempted to inform on the possible directions that Nepal is heading towards to ensure stability and security.
Participants, on the occasion, however asked why the government has treated private-sector employees as second class citizens. “This is obvious when we compare the benefits contributors receive from the Fund with benefits the government employees receive from Pension Fund,” a participant said, adding that the most of the government and private sector associations are currently associated with the Citizen Investment Trust (CIT) and the Employees’ Provident Fund (EPF) and since these two organisations provide better facilities there was no point in joining the scheme.
Though, the government has launched the programme with much fanfare last year, Social Security Fund has turned to be only a ‘pension scheme’ that offers benefits far below the existing EPF and CIT.
A researcher at Samriddhi Foudnation Ankshita Chaudhary began the session by giving a brief introduction of the emergence of the contribution-based social security scheme. The presentation highlighted – the inability of the SMEs to cope with rising costs, differences between the government and private sector employees, issues of taxation, among many – some of the difficulties associated with the fund.
Under the Social Security Fund, enrolled employees will be entitled to assistance for medical treatment, health and maternity protection, accident and disability protection, dependent family protection, and elderly protection (pension). The employers, who have signed up in the Social Security Fund system have listed over 50,140 employees for their contribution in the scheme.
Last week also, a team from the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) had requested the government to revise and include more realistic provisions that could help attract more contributors.

BFI employees not interested to join Social Security Fund

Banks and financial institutions (BFIs) expressed their reservations on Social Security Fund (SSF) despite the government and central bank’s direction last week on mandatory enrollment.
The members of the Nepal Financial Institution Association (NFIA) – an association of people working in banks and financial institutions – threatened to launch protests, if the central bank forces then and does not roll back its direction of mandatory participation in the scheme.
“The regulatory body has issued a circular without consulting BFIs,” according to a press note issued by the association. “It is not under the jurisdiction of the central bank to direct BFIs to join the scheme,” the press note reads, adding that financial institutions will not join the social security programme as it does not ensure basic rights of workers in the financial sector. “We will be compelled to protest, if central bank does not roll back its direction.”
They have been demanding that the government include insurance policy for dependent family members of the banking staffers. Likewise, they are also demanding that mandatory registration of staffers in the Social Security Fund for those who had joined the institution after the fund has been established.
The government fixed November 30 deadline for the private sector to get listed in the scheme, which aims at providing pension to retired employees of the private sector as well. Though, government is planning to extend the deadline to convince more private sector institutions – especially BFIs – in the scheme, the private sector employees are not much interested in joining the scheme.
Meanwhile, commercial banks have also expressed their concern in the scheme. They, though, claim that the scheme is good, the bank employees are not interested as they think they are not ensured of the basic facility that they have been getting.
“We are already registered at the Employees Provident Fund (EPF) and Citizen Investment Trust (CIT),” the association said, adding that they are not interested in joining the scheme as they are not ensured of facilities that they have been already getting through EPF and CIT.
Likewise, Nepal Bankers Association (NBA) is going to held meeting with the central bank to rely their concerns. Some 131,577 workers and 11,797 employers have been listed in the social security scheme till date.

Central bank asks fund managers to enforce AML laws

The central bank has asked Employees Provident Fund (EPF), Citizen Investment Trust (CIT) and Postal Savings Bank to enforce anti-money laundering (AML) measures.
Issuing a directive to implement AML laws at the state-owned fund managers to prevent transfers of illegally acquired money in accordance with a Cabinet decision, the central bank said that the law is needed to be implemented at the government operated institutions too as they manage huge amounts of money collected from civil servants and private sector employees.
The EPF – that provides provident fund services to more than 600,000 clients including government employees – extended its services to employees of private companies too, after Parliament passed the necessary legislation in 2014. Among the total clients, around 166,000 are private sector employees.
Likewise, the Citizen Investment Trust (CIT) manages the retirement fund, gratuity and pension and insurance funds of various organizations including government and non government institutions. It currently holds deposits totalling more than Rs 111 billion.
Similarly, the Postal Savings Bank holds deposits amounting to more than Rs 1 billion, collected particularly from rural areas of the country.
The central bank enforced the directive aiming to extend AML measures to non-banking sectors too. The new law will enable these institutions to act as an oversight agency to check black money transactions in their concerned areas.
The central bank has also asked them to devise working guidelines under headings like internal responsibility and work divisions, risk-based evaluation system and procedures and identification and follow up of risk-based customers and suspicious transactions. “These institutions have to prepare lists of high ranking government officials and their family members so that they can carry out instant enquiries in case any transaction made by them looks suspicious,” the directives read, adding that they need to update the overall customer lists annually based on the degree of risk.
The central bank has asked them to report to the Financial Information Unit (FIU), if an individual carries out transactions of more than Rs 1 million either physically or electronically from abroad. “If the transaction is done in foreign currency, the upper limit has been fixed at an amount equivalent to Rs 500,000,” the directives reads, adding, “For each of these transactions, a separate threshold transaction reporting is mandatory.”
Nepal is now in the process of fulfilling compliance of AML to report to the Asia Pacific Group (APG) on Money Laundering, a regional anti-money laundering watchdog of the Financial Action Task Force. The watchdog body is scheduled to conduct mutual evaluation of Nepal through peer review next year in 2020. With the evaluation time approaching soon, the government has been tightening and implementing the AML laws to check black money transfers, though the Department of Money Laundering Investigation has not been performing as it was expected also due to frequent transfer of its chief.

Panel recommends NAC privatisation

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.

Government plans new strategy to combat money laundering

The government has prepared National Strategy and Action Plan for Combating Money Laundering and Financing of Terrorism to combat money laundering and also to save the country from being black listed from the Financial Action Task Force (FATF) review meeting.
The government has introduced a new strategy to combat terrorism financing and money laundering with stringent provisions, informed a government official, who was in the team to prepare the strategy.
The FATF – an international inter-governmental organisation tasked with combating money laundering – will review Nepal’s progress in combating terrorism financing and money laundering in 2020-21, he said, adding that Nepal is though under the Asia Pacific Group (APG) on Money Laundering, which is a member of FATF. “As a member of the FATF’s Asia Pacific Group on Money Laundering, Nepal’s progress will be reviewed.”
As part of the Asia Pacific Group (APG) on Money Laundering, the official said that Nepal has managed to avoid being blacklisted so far but it faces a high risk due to slow progress and its non-committal approach to combating money laundering. If a country is blacklisted, all foreign financial institutions will stop conducting transactions with the country. Import and export will also be stopped, if any bank rejects transactions. “This strategy seeks to make all sectors equally responsible,” he said, adding that it has primarily added to the responsibility of banks and financial institutions, and the investigation body has been further empowered.
The government has brought the new strategy that allows for anyone accused of financial impropriety to be investigated for money laundering, which means any complaint registered with government agencies like the Commission for Investigation of Abuse of Authority (CIAA), Nepal Police, Department of Revenue Investigation (DRI), and the Department of Foreign Employment (DoFE) will automatically be up for investigation for money laundering.
Though, the incumbent Prime Minister KP Sharma Oli has brought the Department of Money Laundering Investigation under him – claiming to make it stronger, which the opposition blames to misuse the power – the new strategy will provide authority to the Nepal Police to investigate and file cases related to money laundering and terror financing. The strategy will be monitored by the Prime Minister’s Office (PMO) and the Cabinet. But it has created more confusion among government bodies also after the Department of Money Laundering Investigation was brought under the Prime Minister’s Office.
The strategy read that the Nepal Police will be upgraded with necessary skill sets to qualify it to coordinate with the Department of Money Laundering Investigation in probing such cases regarding investment in criminal activities. “Central Investigation Bureau (CIB) under the Nepal Police will be used to exchange information among all related departments,” it reads, adding that cases of severe nature and high risk will be investigated jointly.
The Department of Money Laundering Investigation, currently, is the sole agency to file cases regarding money laundering. Acording to the Money Laundering Prevention Act 2008, “in case the police or other departments want to investigate cases, they would need permission from the department.”
The new strategy, however, reads that this provision in the Money Laundering Prevention Act 2008 will be amended. The failure to amend Money Laundering Prevention Act 2008 has made it difficult to conduct important tasks relating to the prevention of money laundering. It is doubtful whether the current strategy will also be implemented.
Likewise, the strategy also reads that there will also be a mandatory provision for an individual to have only one account. “Transactions of above Rs 100,000 will be allowed only through digital accounting,” it reads, adding that any state financial transactions will be carried out via bank accounts.
There are also provisions to digitalise transactions and information through mobile apps.
Though, Nepal has still to do a lot before the review meeting to not again listed under grey zone, the strategy has prescribed plans to design a set of procedures related to money laundering that will be included in all public sector training manuals. “The government officials will also be required to sign a performance contract on eradicating money laundering, which will become a basis for their evaluation.”
The strategy also plans to bring all remittance-related activities under the surveillance of the central bank, which needs to maintain a list of remittance companies, company agents and branch agents.
Likewise, the Department of Foreign Employment should provide remittance orientation training before issuing labour permits to foreign employment seekers,” the strategy reads, adding that the Department of Foreign Employment, Foreign Ministry, the Non-Resident Nepali Association (NRNA) and their country organisations, and the Immigration Department should have their links on the website of central bank. “The government will also make it mandatory for all banks, financial institutions and remittance entrepreneurs that they ensure that their transactions are conducted through software.”
The strategy also aims at enforcing the use of software for Securities Board of Nepal (Sebon), the Employees' Provident Fund (EPF), Citizen Investment Trust (CIT) and all savings and financial cooperatives, which have their paid up capital exceeding Rs 100 million.
The purchase of house, land and valuable metals by non-financial professionals and entrepreneurs will be strictly monitored, reads the strategy that has listed new technology and non-profit sector as high risk areas. “Special regulatory surveillance will be arranged for businesses like currency price transfer, currency exchange, real estate and precious metals.”
The strategy also has a provision for signing treaties for mutual legal support – to help check the dirty money flow – and such treaties will be signed with at least two countries in a year.
Nepal – if failed to bring stringent measures to control flow of dirty money – will be blacklisted, thus has no option than to come up with a stricter strategy and implement it to avoid getting blacklisted. But the implementation part still remains a challenge as according to the FATF, the most vulnerable group – Politically Influential People (PIP) – that is responsible to bring the law and implement – have the most black money earned through the corruption, tax evasion, commission and red tape.
According to former finance minister Shanta Raj Subedi, “Nepal has no option but to implement the strategy to avoid being blacklisted.”
Though Nepal has escaped blacklisting by the FATF, it has failed to come up with workable mechanisms to convince the international agency that it is committed to implementing the existing provisions to stop finance terrorism and money laundering.
Nepal has already been blacklisted once, and if this time the country is blacklisted again, it will be not only damaging to the economy but also very difficult to get out of the list as it has not been serious in implementation of its international commitments. 

Nepal Airlines to incur a loss of Rs 1.5 billion

Nepal Airlines Corporation (NAC) today told the Parliamentary Finance Committee that it could incur a loss of Rs1.5 billion in the current fiscal year, ending next week.
The national flag carrier’s losses on domestic operations amount to Rs 500 million, and losses on the international sector totals Rs 3.99 billion, informed NAC executive chairman Madan Kharel. “These losses overshadowed the net profit of Rs 3 billion the airline made from its ground handling operations at Tribhuvan International Airport (TIA),” he said, adding that the corporation had posted a profit of Rs 200 million in the last fiscal year.
Kharel attributed the losses to higher fuel prices and competition from budget airlines, which prompted low fares of the. “The corporation failed to pay another quarterly installment due in July due to a 'temporary liquidity crisis',” Kharel said, adding that it is the third time that NAC has defaulted on repayments to Citizen Investment Trust (CIT) and Employees Provident Fund (EPF), and its debts have piled up to Rs 1.13 billion. The national flag carrier has not paid two quarterly installments amounting to Rs 1.18 billion to the EPF and one quarterly installment of Rs730 million to the CIT.
The corporation has borrowed Rs 36 billion to the CIT and EPF, and it has to pay annual interest of Rs 3.66 billion to them but the state-owned airlines, which has been struggling to manage its cash flow since it inducted two brand new Airbus A330 jets into its fleet last year, has also failed to utilised the aircraft due to lack of proper plan, and routes. According to Kharel, operating the Airbus A330 jet is three times costlier than the Airbus A320. The corporation has two A320s.
Former Prime Minister Dr Baburam Bhattarai, on the occasion, said that the corporation is ill, and it needs a proper cure for the disease. He also suggested to privatise the company to turn it into a successful company.
Likewise, lawmaker Ghanshyam Bhusal said that Nepal Airlines is keeping its head above water with its income from ground handling.
Though, the tourism secretary Mohan Krishna Sapkota, on the occasion, said that the corporation needs restructuring.
The NAC has started knocking on the government's door asking for a bailout since 2017. In 2017, it asked for Rs 20 billion to raise its paid-up capital to support its financial restructuring plan.

PM Oli warns of seeking strategic partner to run NAC

The government is not doling out the funds to the bankrupt national flag carrier rather seek a strategic partner to run the Nepal Airlines Corporation (NAC).
Coming down heavily on 'non-performing' entity, Prime Minister KP Sharma Oli – addressing the 61st anniversary of Nepal Airlines Corporation (NAC) here today – said that the government will not inkect any fund under the existing circumstance as it has no trust on the incumbent management. But the management team led by executive chairman Madan Kharel has been appointed by himself and his cabinet last September. “The company buys the planes first and finds the pilots to fly them later,” he said, adding that it procured wide-body jets but it doesn’t have destinations to fly to. “There is high demand for services to Japan’s Narita International Airport, but it decides to fly to Kansai International Airport in Osaka instead.”
Planes of other companies are in the sky, but Nepal Airlines planes are seen on the tarmac at Tribhuvan International Airport (TIA) all the time, Oli added.
The private sector airlines have been making profits, but the NAC has incurred Rs 37 billion loss and also failed to pay last two installments of its loan. The NAC has not been able to repay the principal and interest to two state-owned financial institutions. According to the NAC, it has defaulted on two quarterly installments of Rs 1.18 billion to the Employees Provident Fund (EPF) and one quarterly installment of Rs 730 million to the Citizens Investment Trust (CIT). The corporation will not be able to pay the third installment either, it added.
The government had rescheduled the interest payment deadline for its loans taken from EPF and CIT. But still the NAC owes more than Rs 36 billion to various institutions, which means interest payments totalling Rs 3.66 billion annually.
“The government will not give even a single penny since the NAC has already incurred a huge loss due to its mismanagement," Premier Oli said, adding that the government will be compelled to search for a strategic partner, if the NAC did not undergo positive changes in its overall performance.
The NAC has been asking for a bailout. In 2017, it has asked for Rs 20 billion from the government to raise its paid-up capital to support its financial restructuring plan. It has been struggling to manage its cash flow since it inducted two brand new Airbus A330 jets into its fleet last year, as they remained largely under-utilised for months for lack of routes.
Though, the government claims to have a turnaround plan – including capital restructuring and inducting a strategic partner – for the bankrupt corporation, the NAC seems not improve its financial health also due to political red tape.
The NAC currently has two wide-body and two narrow-body aircraft in operation. They fly to seven countries including India, Malaysia and Qatar. But the small aircrafts – donated and sold by China – for the domestic flight are a financial liability as the NAC has not been able to fly them due to lack of pilots.
NAC executive chairman Madan Kharel, on the occasion, briefed the gathering that the achievement of expected profit became impossible as NAC resources, primarily aircrafts in its possession, could not be operated to the full strength and the size of destination could not be expanded. According to him, procedures are on the progress to enlist Guangzhou of China and Riyadh of Saudi Arabia in the NAC destination soon.
According to the NAC report, till the first nine months of the current fiscal year, the NAC earned a profit of Rs 7.54 billion compared to Rs 3.85 billion in the same period of the last fiscal year. The number of passengers flying by NAC on flights routes during the first 11 months of the last fiscal year stood at 348,528 while some 569,034 passengers flew on international flights during the same period of current fiscal year, which is 63.5 per cent more.

Upper Tamakoshi IPO oversubscribed four times

The primary shares of Upper Tamakoshi Hydropower Ltd (UTHL) have been oversubscribed by nearly four times.
Some 15.89 million units of primary shares worth Rs 1.59 billion of Upper Tamakosi Hydropower drew subscriptions worth over Rs 6.32 billion by the closing today, confirmed deputy manager of Citizens Investment Trust (CIT) Roshan Jung Karki. CIT is the lead issue manager of the hydropower's initial public offering (IPO) that has a face value of Rs 100 per share.
The national pride project is being developed by a subsidiary of the state power utility Nepal Electricity Authority (NEA). The hydropower company opened its IPO of 15.8 million shares on Thursday and by Monday when it closed, 346,166 persons had applied for 67 million shares worth Rs 6.7 billion. The share allotment process will take at least two weeks.
An investor will get at least 40 units of shares of the 456-megawatt (MW) peaking run-of-the-river hydropower company that is being constructed by mobilising domestic resources.
Apart from the current 15 per cent offering to the general public, the hydropower has already issued 105.9 million units of shares for the locals of the project-affected Dolakha district last week. Public shareholders, including the locals of Dolakha, will hold 25 per cent ownership in the project.
Though the application process for the primary shares for general public was carried out through Centralised Applications Supported by Blocked Amount (C-ASBA) system from member banks of ASBA, the issue manager could not block previous applicants of the earlier offering which was conducted manually.
Similarly, some 18.3 million units of shares (17.28 per cent) have already been allotted to the members of Employees Provident Fund (EPF), while staffers of EPF and the project received 2.88 per cent of the shares (304,290 units). Likewise, staffers of Upper Tamakoshi and NEA have been allotted 3.84 per cent (4.07 million units) of the shares.
The much-awaited hydropower project is expected to start electricity generation by mid-July next year. The model project is expecting commercial generation by mid-November, 2019.
Last week, the project office extended the completion deadline by six months as it wasn’t going to be able to start operating one of its six turbines by December 2018 and complete the entire project by April 2019 as originally planned due to earthquakes, the Indian trade blockade and other technical issues including dillydallying by one of the contractors as reasons for the delay in the national pride project where 95 per cent of the construction works have been completed.
The delays has pushed the cost of the project that was initially planned to be constructed at a cost Rs 35 billion but the final bill is now expected to reach Rs 70 billion.

NAC to buy European aircraft from US company

Nepal Airlines Corporation (NAC) today selected an American Company to purchase 2 wide-body European aircraft.
The corporation will issue a letter of intent (LoI) to the American leasing company – AAR Corp – tomorrow to supply two-wide body Airbus A 330-200 aircraft, NAC managing director Sugat Ratna Kansakar informed. A letter of intent is a document expressing an intention to enter into a contract at a future date.
The NAC board – led by secretary of Ministry of Culture, Tourism and Civil Aviation – today unanimously agreed to award the supply contract to US-based AAR Corp.
The board has selected the lowest bidder – AAR Corp – which has proposed to supply each aircraft for $104.8 million, he said, adding that the negotiations with the supplier will be held very soon in Kathmandu. "The cost of the aircraft and delivery date will be finalised during the negotiations."
Kansakar said that the ‘offer price’ quoted by the company was not the final price as it may go up slightly up due to inflation when final contract negotiations are completed. "When the cost of the aircraft will be finalised, a purchase agreement will be signed after the negotiations."
"We will ask the supplier to come to Nepal as soon as possible to sign an initial memorandum of understanding (MoU),” he said, adding that the corporation has targeted concluding the MoU within two weeks so that it can begin detailed technical and financial negotiations. A technical team consisting of members of the two parties would be formed to hold detailed negotiations. The entire process could be completed within three to four weeks.
There were six bidders in the final round. The corporation board selected AAR Corp due to the appropriate rate it proposed and the credibility of the company. Though the bid evaluation committee had evaluated the proposals of 10 bidders, four did not qualify in the initial stage itself.
A notice inviting proposals from aircraft manufacturers, airlines, aircraft leasing companies and bankers for two Airbus A330-200 aircraft was issued on September 26. There were 11 hopeful suppliers, and the highest price quoted was $146 million.
The corporation has stipulated that the jets should not have more than 1,000 flight hours on them, and that the date of manufacture should not be before January 2014.
The AAR Corp has – in request of proposal – offered to deliver the first aircraft by September 2017 and the other by March 2018.
The supplier should include the cost of a minimum set of flight and maintenance crews for the duration of at least one year. It should also include the cost of consumable spares and tools required for day-to-day line maintenance up to the ‘A’ check level for a year.
The carrier has proposed procuring long-range jets to serve destinations in North America, Japan, Australia and the UK as they have been identified as prospective markets for Nepal over the next 20 years.
The corporation had purchased two Airbus A320-200 aircraft in 2015 by borrowing Rs 10 billion from the Employees Provident Fund (EPF) in its first fleet expansion in 27 years.
The national flag carrier currently has two narrow-body Airbus aircraft and one narrow-body Boeing aircraft in its international fleet. The fleet is flying to eight destinations. After addition of two wide-body aircraft, the corporation start flying on long haul destinations, as the average flight range of the A 330-200 series aircraft will be nine to 10 hours.
The national flag carrier is preparing to fly to Japan and South Korea with the new two wide-body aircraft that is expected to not only increase its market share but also recover its lost glory.
So far, the national flag carrier has received landing permit for Inchhan International Airport in South Korea and Saudi Arabia. Kansakar also informed that the corporation has also approached civil aviation authority of Japan to receive landing permit. "In the long run the corporation also plans to expand its network to Australia and Europe," he added.
Though, international lenders are ready to invest on corporation, the corporation has approached EPF and Citizen Investment Trust (CIT) for the loan to buy the two aircraft.
The corporation had – in the past too – borrowed from the EPF and CIT to purchase the two narrow-body Airbus aircraft. The government-owned financial institutions have been charging nine per cent interest rate from NAC. "But this time the corporation has also approached some private banks," Kansakar said, adding that the private financial institutions are positive about consortium financing. "They are expected to quote an interest rate that is lower than that of the government-owned financial institutions."
The government is giving guarantee for the loan that NAC is planning to obtain.
The corporation will soon finalise loan agreement with the government-owned financial institutions, as the supplier has been issued LoI and invited for negotiations," he added.

After Finance Ministry green signal, NAC to buy two widebody jets

If everything goes as planned, national flag carrier Nepal Airlines Corporation (NAC) will have a new Airbus in its fleet by next September. "We are planning to bring one wide body aircraft by September 2017 while a second one will arrive by April 2018," said Nepal Airlines Corporation (NAC) managing director Sugat Ratna Kansakar.
The national flag carrier is planning to call a tender for two wide body aircraft by December and sign the aircraft purchase agreement by March 2017, he said, adding that the plan appeared possible after finance minister Krishna Bahadur Mahara today promised the NAC team led by tourism minister Jeevan Bahadur Shahi that he would table the proposal in the cabinet soon.
"Finance Minister Mahara has promised to take the proposal to the cabinet to secure the government's guarantee," he added.
NAC had long been seeking government guarantee to purchase two wide body aircraft and expand in the international market. Currently, the national flag carrier flies to eight international destinations including three Indian cities, and it plans to expand to Guangzhou, China soon. The new wide body aircraft will help NAC start non-stop flights to London, Kansakar added.
We will be borrowing Rs 25 billion from the Citizens Investment Trust (CIT) and the Employees Provident Fund (EPF) after the government's guarantee, Kansakar said. "Details of the borrowing plan are being worked out."
NAC has already borrowed Rs 10 billion from EPF for the purchase of two Airbus aircraft last year. The details for fresh borrowing will be worked out by the board and the nitty-gritty of the procurement finalised, he added.
The national flag carrier is planning to phase out its ageing Boeing 757s and run an all-Airbus fleet. The induction of two new jets will bring the number of Airbus aircraft with NAC to four. The Airbus 330 can accommodate up to 280 passengers and serve long-haul destinations like the UK, Japan and Australia.
NAC currently has five different types of aircraft – Boeing, Airbus, Twin Otter, MA60 and Y12e – in its fleet and this has made it difficult to manage different sets of pilots, engineers and spare parts.
The current fiscal year budget has also promised funds for the national carrier to buy the widebodies. NAC's market share on the international routes stood at 7.88 per cent in 2015, up from 5.87 per cent in 2014. Two new Airbus aircraft is expected to double the market share.
The Plan
• To fly non-stop on Kathmandu-London-Kathmandu route
• First widebody likely ro arrive by September 2017
• Second one by April 2018

Government committed to complete Upper Tamakoshi on time

The government is committed to bring the Upper Tamakoshi hydropower into operation after mid-July 2016.

Asking the developers today to expedite the 456- megawatt Upper Tamakoshi powerhouse construction and land acquisition to build transmission lines as soon as possible secretary at the Office of the Prime Minister and Council of Ministers Krishna Hari Baskota said that the hydropower project is one of the national pride projects. "It should not face any shortages of budget or staff," he said, asking the developers to concentrate on completing construction of pen-stock shaft, powerhouse, transmission lines and sub stations on time.

The hydel project financed by the domestic resources is going to float shares to the public replicating the success of Chilime Hydropower.

After the issue of public share, the share structure of the run-of-the-river project in Dolakha district will be; Nepal Electricity Authority's 41 per cent, Nepal Telecom (six per cent), Citizen Investment Trust (two per cent), Rastriya Beema Sansthan (two per cent), public (15 per cent), locals of Dolakha (10 per cent), and clients of Employees Provident Fund, and employees of Tamakoshi Hydropower Company, NEA and lending institutions (24 per cent).

Rs 35.29 billion project has so far spent Rs 16.29 billion, Baskota informed, adding that works are underway on all four fronts of civil construction, hydromechanical and electromechanical equipment designing and installation, and building of transmission lines and substations. "Around 51 per cent of work on building concrete structure at headworks is complete."

The project has signed Power Purchase Agrement (PPA) with NEA to sell the electricity generated at  a cost of Rs 3.63 during wet season and Rs 6.98 during dry season per unit.

Development bonds oversubscribed by over eight times

The banks and financial institutions flush with liquidity applied aggressively for the Rs 3 billion worth development bond issued by the central bank on Thursday.

The  central bank has received Rs 26.44 billion worth applications – over eight times – of which banks and financial institutions applied for Rs 23.02 billion worth development bonds,  Citizens Investment Trust (CIT) for Rs 1 billion and Employees Provident Fund (EPF) for Rs 900 million worth bonds.

Of the total issue, 70 per cent is for competitive bidding for the interest rate for the first time as a policy departure. The central bank received some Rs 24.02 billion worth application under the category, whereas under the non-competitive category, it received Rs 2.42 billion worth application.

Banks and financial institutions and CIT applied for the bonds under competitive bidding, whereas EPF and general public applied under non-competitive bidding.

After receiving the applications, the central bank has fixed 3.25 per cent interest rate under competitive bidding. The highest rate quoted by the bidders was 9.5 per cent and the lowest one per cent.

According to the central bank, the rate was fixed on the basis of bidders' quoted rates from lowest in as ascending order. The same interest rate will be applicable for applicants under non-competition category too.

The central bank is planning to allot the bonds, within a week, on November 21.

Central bank to float bonds worth Rs 3 billion

The central bank is issuing development bonds worth Rs 3 billion this week under its calendar of domestic borrowing.

The government has – in the budget for the current fiscal year 2013-14 – planned to borrow Rs 44 billion from the domestic market to finance the budget deficit.

Some 70 per cent of the five-year Rs 3 billion-bond will be auctioned to banks and financial institutions, whereas the remaining has been separated for non-depository institutions like insurance companies and state-owned firms like Employees Provident Fund (EPF) and Citizen Investment Trust (CIT).

The budget has also planned to issue different types of bonds worth Rs 30 billion and treasury bills worth Rs 14 billion, making it a total of Rs 44 billion, according to the government's fiscal policy.

The government will – for the first time – allow the market to determine the interest rate of the bonds.