Two Chinese-manufactured MA-60 turboprop civilian aircraft, which were initially ordered by the then royal government and subsequently endorsed by the current government, will soon land in Nepal.

An investigation by the Post reveals that the US$27 million (about two billion rupees) deal is fishy on three grounds: price, technical soundness of the aircraft, and their need in Nepal.

Price Nepal is buying the aircraft at a grossly inflated price. When the Chinese manufacturer-- Xian Aircraft Industrial Corporation -- first approached the then Royal Nepalese Army in August 2005, it had offered three aircraft at US$32 million ($25 million for the aircraft and $7 million for spares) on a buy-two-get-one-free basis. Now Nepal is buying two aircraft and spares for US$ 27 million. Another clear indication of the inflated price comes from the sale of three similar aircraft by the company to Air Zimbabwe for US$22 million in April 2005. A highly placed government source smells a rat in the whole deal and says, "Price seems to have been inflated by around US$7-8 million, which would go into various pockets as commission."

Technical soundness

The 60-seater aircraft is a new product of the Chinese company and its technology appears to be flawed. All three airplanes purchased by Air Zimbabwe currently remain grounded. The British newspaper, The Sunday Times, in its July 16 edition wrote:

"One of the aircraft had to make an emergency landing at Victoria Falls, injuring many passengers, and the second one caught fire on take-off in Harare in early July this year (See www.timesonline.co.uk/newspaper/0,,176-2271971, 00.html)."

Pointing out the aircraft's technical flaws, the UK and the US Federal Aviation Authority (FAA) have denied it certification. An official even claimed that international reinsurance companies do not insure such aircraft since they do not have UK or US FAA certification.

Need

The aircraft are being purchased virtually without any need. So much so that it's still not clear who will actually fly them. The then Royal Nepalese Army originally ordered the aircraft but it has already informed the government that it doesn't need them any longer. So, the government is planning to pass the aircraft on to Nepal Airlines Corporation (NAC) on lease. But officials at NAC said the corporation is unwilling to gamble on the technically unproven aircraft. Moreover, say the officials, the profitability of operating the aircraft in the intensely competitive domestic market is doubtful. Observing that the aircraft are of no use to NAC, a top official at the Ministry of Culture, Tourism and Civil Aviation (MoCTCA) said NAC will not accept them at any cost.

Dubious origin

"The origins of the aircraft deal are themselves dubious," says a highly placed official. It was a deal pushed by a supplier and had nothing to do with domestic demand. The aircraft manufacturer wrote directly to then Tourism Minister Buddhi Raj Bajracharya. Following an invitation, Minister Bajracharya, along with Rajesh Raj Dali, then director general of the Civil Aviation Authority of Nepal (CAAN) and other ministry officials visited the company. The team tried to buy one aircraft for CAAN, but this was rejected by its board. Later, the Chinese company wrote directly to then army chief, Pyar Jung Thapa, and the deal then moved ahead swiftly.

Flouting financial regulations, Defense Secretary Bishnu Dutta Upreti signed an agreement with the company to buy the aircraft. Later on this was corrected with representatives from the Ministry of Finance (MoF) and the Chinese government also signing the deal.

Current government initially for cancellation

In his white paper issued after assuming charge of the ministry, Finance Minister Dr Ram Sharan Mahat had vowed to cancel the deal saying it was a "liability passed on by the royal regime to the state". Ministry officials said Dr Mahat had promised to cancel the deal even if the Rs 400 million paid to the Chinese company as advance was forfeited.

Dr Mahat even held a meeting with Chinese Ambassador to Nepal, Sun Heping, during which the latter agreed to meet the request and asked the ministry to send a formal letter.

"However, we suddenly received a letter two months later from the Chinese party refusing to cancel the deal," said the official. After that even Dr. Mahat dropped his stance and took the matter to the cabinet which swiftly approved the purchase.