Nepal | July 08, 2020

Panel recommends NAC privatisation

Says national flag carrier should divest 49 pc of its shares

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Kathmandu, September 18

A task force formed to improve functioning of Nepal Airlines Corporation submitted its report to the Ministry of Culture, Tourism and Civil Aviation today, recommending privatisation of the national flag carrier by divesting 49 per cent of its shares to Nepali and foreign investors and the public.

“NAC is currently operating under the Nepal Airlines Act-1962, while a lot has transpired in the aviation sector since then,” said Sushil Ghimire, former tourism secretary and coordinator of the task force, 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, he added.

He, however, opined that the national flag carrier should uphold its corporate social responsibility even if it is transformed into a profit-oriented company. “NAC should be operated under public-private partnership model,” said Ghimire.

The report has suggested renaming NAC as Nepal Airlines Company Pvt Ltd, where the government would have 51 per cent stake. It has recommended floating 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.

Several studies and discussions conducted earlier had also recommended privatisation of NAC. However, not much has happened on that front till date.

After receiving the report from the task force, Tourism Minister Yogesh Bhattarai directed the MoCTCA to take action based on the recommendations.

As NAC is facing financial crisis at the moment, the report has recommended that the ministry should bring policies for improvement of NAC. As per the report, NAC’s loss stands at Rs 5.21 billion, while it is saddled with the debt burden of Rs 40 billion. Its total assets amount to Rs 3.60 billion.

“NAC has been unable to pay back its debt for the last three quarters, deepening the financial crisis of the national flag carrier. Moreover, the interest on NAC’s loan is higher than the prevailing market rates and the government should intervene,” the report adds.

The report has also recommended that the NAC conduct sector analysis, improve its fleet and flight management.

Identifying lack of manpower as one of the major problems facing NAC, it has urged the corporation to focus on human resource management.

“Owing to its weak financial health, NAC has neither been able to offer attractive wages to new recruits nor has it given good raise to its current staff.

“NAC needs to focus on human resources management as well,” adds the report.

The report suggests utilising information communication technology, conducting due diligence audit, upgrading its accounting system into Nepal Financial Reporting Standard, analysing performance indicators, investing more in infrastructure such as transit cargo store, passenger transit hall, hangar, helicopter service, catering services and establishing flight training institutes.

A version of this article appears in print on September 19, 2019 of The Himalayan Times.

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