Nepal | February 17, 2019

Govt plans to divest stake in NAC

Umesh Poudel

Kathmandu, December 5

The government is planning to divest its stake in Nepal Airlines Corporation by roping in a strategic partner, as the national flag carrier has failed to expand business and generate profit even after adding four new aircraft to its fleet.

“We have initiated the process of conducting the due diligence audit of NAC,” Minister of Culture, Tourism and Civil Aviation Rabindra Adhikari told the Public Accounts Committee of Federal Parliament today. The due diligence audit (DDA) will provide complete picture of NAC’s financial health.

“Once the DDA is completed we will initiate the process of bringing in a strategic partner, which will be given a stake in the company,” Adhikari said. “Strategic partners worldwide have helped national flag carriers to improve their business. We hope NAC’s strategic partner will transform the state-owned company into a strong institution and a better service provider.”

To facilitate the process of bringing in a strategic partner, steps are being taken to register NAC as a company under the Companies Act, Adhikari said.

Earlier, four foreign companies Turkish Airlines, Ethiopian Airlines, Fly Dubai and Qatar Airways — had expressed interest to become NAC’s strategic partner. A few years ago, the government had also initiated the process of roping in Germany-based Lufthansa Consulting Group as a strategic management partner at NAC. But the plan did not materialise due to political wrangling.

NAC is wholly owned by the government. Although the stake the government is planning to divest from NAC is not known, Finance Minister Yubaraj Khatiwada had suggested that the airline company disinvest 51 per cent of its stake.

The finance minister had made that recommendation after the Ministry of Culture, Tourism and Civil Aviation sought funds from the government to prop up the financial condition of NAC.

Previously, NAC had requested the government to inject fresh capital of Rs 20 billion, as its debt and losses started mounting. NAC’s overall debt stands at Rs 32.87 billion. It has to pay an interest of 10.5 per cent per annum on this debt, which is bleeding its coffers dry. NAC’s debt has soared as it has purchased two narrow-body and two wide-body Airbus aircraft. But even after getting these airplanes it has not been able to fly to new destinations, rapidly increase flight frequency or enhance flight occupancy, forcing it to suffer huge losses.

Lawmakers said NAC’s financial woes were a result of its inefficiency and ineffectiveness. They also criticised Minister Adhikari for being a mute spectator to financial irregularities taking place at NAC. Wide-body purchase deal, for example, was riddled with irregularities, lawmakers said, seeking the resignation of NAC Managing Director Sugat Ratna Kansakar and seeking action against him.

“If he does not quit, the government should sack him,” said Bishal Bhattarai, a lawmaker from ruling Nepal Communist Party (NCP).


A version of this article appears in print on December 06, 2018 of The Himalayan Times.


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