Kathmandu, September 25

Due to the perennial financial crisis that Nepal Airlines Corporation (NAC) has been facing, the Employees Provident Fund (EPF) has suggested the government to privatise the national flag carrier and run it as per company model.

On September 9, the EPF had submitted a seven-point memorandum to Minister of Culture, Tourism and Civil Aviation, Yogesh Bhattarai, and suggested the reforms to better manage the national flag carrier.

Tulasi Prasad Gautam, administrator at EPF, said that the fund has submitted the memorandum to the ministry and suggested privatisation as the best possible solution for NAC.

The EPF has also mentioned that it is against bringing in foreign investment in the name of strategic partner at NAC. “Nepali companies are capable of handling and managing NAC’s liability, including its overall management through our plan.”

The seven-point suggestion provided by EPF speaks of reforms in NAC’s management, governance, finances, internal control (loan), legal framework, human resources and assets management.

“We have argued that if the government brings in a foreign strategic partner, then the country could lose out as it will repatriate a huge amount of profit. So, we have planned to increase our presence in the core management of NAC.”

EPF has said that the government should keep 51 per cent stake in NAC and the remaining 49 per cent should be provided to government-owned entities like EPF, Citizen Investment Trust, Social Security Fund and the private sector, among others.

The EPF has also suggested the same contract management model that was adopted at Rastriya Banijya Bank (RBB) under the financial sector reform project in 2005. At that time, Nepal Rastra Bank had accorded RBB the full autonomy as excessive political interference in appointments and lending were deemed to have caused a huge damage to the bank earlier.

“Our plan is to use the same model as RBB to manage NAC,” said Gautam. “We have suggested a plan to raise and inject Rs 40 billion equity into NAC, which we believe will help revive it as a vibrant company,” Gautam said, adding that if additional investment was required it could be managed from various other sources in domestic market.

Though EPF is against the idea of bringing in a foreign strategic partner as an investor, it has suggested to bring in a reputed foreign company to handle the core management aspects of the national flag carrier, including the chief executive officer and other department heads.

Arjun Kumar Gautam, chief-in-charge, investment department of EPF, said they have plans to develop a separate model to manage NAC by injecting equity from different state-owned firms, private sector entities and the public.

“At present, EPF has provided Rs 24 billion loan to NAC and if the government follows our model, we have plans to convert and inject around Rs five billion loan into equity. It will help to maintain the financial health of NAC,” he said.

Meanwhile, Kedar Bahadur Adhikari, secretary at Ministry of Culture, Tourism and Civil Aviation, said that the ministry will thoroughly examine the suggestions given by the EPF before taking any decision. “However, the government is not considering the option of foreign investment to address liquidity problem facing the national flag carrier,” he clarified.

On September 24, a task force formed to improve the functioning of NAC submitted its report to the government, recommending privatisation of the national flag carrier by divesting 49 per cent of its shares to Nepali and foreign investors. The report said that NAC’s operation modality needs to be changed to make it competitive and commercially viable.