KATHMANDU, Nov 28: The Ministry of Finance (MoF) is finally signing loan and grant agreement with China on Thursday for the procurement of six new aircraft for Nepal Airlines Corporation (NAC).
With the signing of the agreement, Nepal will acquire two aircraft -- 19-seater Harbin Y-12e and 58-seater Modern Ark 60 (MA60) -- on grant and 3 Harbin Y-12e and a MA60 on concessional loan.
“We are signing the loan and grant agreements with China tomorrow (Thursday),” said a senior official at MoF. The cabinet meeting on Thursday decided to allow the finance ministry to sign the framework for grant and loans for the procurement of six aircraft for the ailing national flag carrier. China is providing a grant of RMB 180 million (around Rs 2.98 billion approximately) for procurement of a Harbin Y-12e and a (MA60).
Similarly, Exim Bank of China will provide concessional loan of RMB 218 million (Rs 3.61 billion approximately) for the procurement of four aircraft, 3 Harbin Y-12e and a MA60.
According to the Ministry of Culture, Tourism and Civil Aviation, the initial loan agreement was of RMB 228 million. However, Chinese officials have agreed to provide the aircraft for RMB 218 million reducing the price by RMB 10 million.
Similarly, during the negotiations, Nepal has agreed to pay an interest of 1.5 percent per annum. The interest rate had been set at 1.75 percent in the earlier agreement.
Likewise, the service charge and management expenses of EXIM bank have also been reduced to 0.4 percent of the total loan from 1 percent proposed earlier.
The Chinese government has shown enough flexibility to allow a grace period of seven years for loan repayment against a period of five years agreed earlier. This means Nepal will have to clear the loan along with the interest within 20 years.
As per the agreement, China will deliver two aircraft, which is being provided on grant, within two-and-a-half months of the signing of agreement. The remaining four aircraft will be delivered within in five months. NAC has already sent the design of aircraft livery to the Chinese supplier.
NAC plans to use the MA60 for mountain flights and other accessible destinations like Pokhara, Bhairahawa, Biratnagar, Dhangadhi, Nepalgunj and Simara. Similarly, it plans to use the Harbin Y-12e for mountain flights and other remote destinations.
At present, NAC only has a Twin Otter aircraft for domestic operation.