The government has yet to pay Nepal Airlines for last year’s Omni charter flights

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It has been more than 16 months since Nepal Airlines operated a chartered flight for the Omni Business Group to carry Covid-19-related supplies from Guangzhou, China, but the national carrier has yet to receive payment for the flight.

The government had chartered the flight on behalf of Omni, who was awarded a controversial contract to deliver medical products despite prices being higher than the government’s cost estimate and that of rival bidders.

The Department of Health Services had promised to pay the cost of the charter flight immediately after the cargo was delivered, but that did not happen despite several follow-ups, officials from the national carrier said. The national airline did not receive payment as its financial situation deteriorated due to flight suspensions caused by the Covid-19 pandemic.

The state-owned company is supposed to receive Rs 19.42 million from the government, which is deductible from the bill payable to Omni.

“We have sent payment requests at least 10 times to the Ministry of Health Services,” said Dim Prakash Poudel, managing director of Nepal Airlines. “But, the government says it could not make the payment because Omni filed a lawsuit against the government’s early termination of the contract.”

On April 1 last year, the department terminated the contract with Omni after the deal signed with the company sparked controversy over alleged political influence to hand over the task to the company.

Previously, the department and Omni signed the contract on March 27 last year to deliver the medical products worth $ 10.03 million in three phases.

Before the contract was terminated, Omni had supplied medical products worth $ 2.33 million in the first tranche on March 29 of last year. The rest of the goods ordered were to be delivered on April 5 of the same year.

Even though the ministry had prepared a cost estimate of $ 9.07 million, it then approved Omni’s proposal, which quoted $ 10.03 million, and signed a controversial deal.

After the ministry unilaterally terminated the contract, withholding payment for the goods brought in and forfeiting the amount of the bank guarantee, the company appealed to the Patan High Court and the case is pending.

Unable to receive payment, Nepal Airlines was unable to repay the portion of the loans it had borrowed from various government agencies, including the Employee Provident Fund and the Citizen Investment Trust to procure planes at wide and narrow body.

“It has been over a year since we last paid the deposit to the creditors,” said Ganesh Bahadur Chand, deputy general manager of the company. “How do we pay the down payments when we can’t collect the debts? “

He said the company’s debts to creditors were growing rapidly due to accrued interest. “In fact, the liabilities exceeded the amount the government had offered as collateral for the loans.”

The government had offered a guarantee of Rs 25 billion to creditors to secure loans to the national carrier for the purchase of wide-body jets and Rs 10 billion for the purchase of narrow-body planes.

The company had received loans totaling 33 billion rupees (24 billion rupees from the Employee Provident Fund and 9 billion rupees from the Citizen Investment Trust) to purchase the new planes for its international flights. But he had not been able to pay the quarterly installments on the loans since January 2020. At the end of the 2019-2020 fiscal year, he had not paid. 534 million rupees to creditors, according to the Annual Review of Public Enterprises published by the Ministry of Finance.

Since the fall travel season began in October 2019, full-fare passengers have been filling its flights, which has brought the company from the brink of bankruptcy. Fall profits allowed the faltering national airline to pay off creditors at close range.

Before the Covid-19 crisis hit the airline industry, it was paying creditors more or less regularly. “The income generated from the limited flights was just enough to cover the administrative expenses of the airline,” said Chand. “We did not generate income to pay the down payments.” The national airline employs around 1,400 people.

Chand said paying the frozen charges for the Omni charter flight would give the national carrier some breathing space at these critical times.

The pandemic has hit the tourism industry and the aviation industry has also suffered greatly due to travel restrictions. Nepal Airlines has also been the victim of travel restrictions. During the 2019-2020 financial year, it suffered a net loss of Rs3.89 billion dollars, according to the Annual Review of Public Enterprises published by the Ministry of Finance.

Currently, it operates three flights per week to New Delhi, two flights each to Dubai and Doha, and one or two to Kuala Lumpur per week. “Flights to Japan, Hong Kong and Bangkok are not taking place,” Chand said.

According to the latest Auditor General’s Report 2021, the national carrier was unable to operate any flights except for charter flights from March 24 to mid-July 2020. According to a study conducted by Nepal Airlines itself, it was expected to lose 10.76 billion rupees in the 2019-2020 financial year. to the pandemic.

Due to the pandemic, she had to return the first payments made by passengers for flights and she also lost the income she was making from ground handling at Tribhuvan International Airport.

As international flights slowly recovered from the first wave of the pandemic, the second wave hit the country in early April this year, again affecting Nepal Airlines, causing financial problems.

“Without government support Nepal Airlines cannot survive this crisis,” Chand said.


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