KATHMANDU, Dec 21: Less than a month after the Ministry of Finance (MoF) released a budget for procuring a helicopter and a cargo aircraft, Nepal Army (NA) has expedited a process to buy two MI-17 V5 helicopters.
Sources at NA headquarters spoke of a proposal to procure two helicopters manufactured by Kazan Helicopter Company of Russia.
"Once the cabinet gives the nod, there will be a procurement agreement for two MI-17 V5 helicopters with the state-owned Rosoboronexport," said a source, asking for anonymity.
Rosoboronexport, which has a 17 percent share in the global defense market, is the sole state agency for Russia's exports and imports of defense-related products and services.
A cabinet meeting on September 8 had released Rs 85.63 million to buy two trainer aircrafts. Prior to this, the government had allocated Rs 370 million in the budget for the purchase of two aircrafts. The additional amount was released after the money allocated in the budget was found inadequate for the training aircrafts.
"Army headquarters has said it is to buy two MI-17 helicopters," said Defense Minister Bhimsen Das Pradhan, adding, "But I have not received the proposal yet. A team from Russia is arriving soon in Kathmandu for negotiations. We will first have discussions on how to send the money. Only then can we reach a conclusion on this deal."
Pradhan said they are working on a government-to-government (G2G) agreement for the helicopter purchase. The Russian team is coming as it is difficult to send the amount to Rosoboronexport because of US sanctions against it over the violation of an arms sale treaty.
"We had faced difficulties in sending money to the company in the past. We were able to send one installment but the second installment did not reach them," said deputy spokesperson of Nepal Rastra Bank Rajendra Pandit.
While 90 percent of the amount was sent from Nepal Rastra Bank, the remaining 10 percent was sent through a German-based bank. Sources said Rosoboronexport has suggested making payments through banks in Germany or France.
Highly-placed sources said the army is seeking an agreement to procure the helicopters at the cost of US $ 17 million each.
"Although the MI-17 V-5 costs US$ 14 million, an additional US$ 3 million is being paid for purposes of the commission," said a source. "The amount put on the website of the company is normally different from the actual amount paid. The price of the Airbus 330 that Nepal Airlines bought recently was set at US$160 million on the official Airbus website. Nepal Airlines ended up paying US$ 104 million."
Nepal Army purchased two MI-17 helicopters from Rosoboronexport some four years ago also. The deal courted serious controversy over allegations of fraud and commission payment.