Nepal Airlines (RA, Kathmandu) has approved a proposal to adopt a public-private partnership model and the required structural changes that would lead to the sale of a 25% stake in the state-owned company, the news site OnlineKhabar reported.
While the government will continue to own 75% of the shares, most of the rest will be sold to other state-owned enterprises in the hope of raising capital, members of the board revealed. However, a small proportion of these shares may also be sold to government employees and the public.
“We have decided to divest a 25% stake in Nepal Airlines, as this will allow state-owned firms like [the pension fund] Employees’ Provident Fund Nepal, [the corporate lender] Citizen Investment Trust, the Nepal Oil Corporation and other entities to invest in the carrier,” explained Kedar Bahadur Adhikari, Nepal Airlines’ chairman of the board, who is also secretary of the Ministry of Culture, Tourism, and Civil Aviation.
According to board member Achyuta Raj Pahadi, the approval, which was made by the carrier’s Decision Implementation Committee, now passes to the Ministry of Finance and the Ministry of Culture, Tourism, and Civil Aviation before being forwarded to the Cabinet for final approval.
The aim of the proposed model, Pahadi said, is for Nepal Airlines to obtain revenue and make its own decisions independent of the government.
The debate about privatising the national airline was first discussed and approved in 2002-2003, and again raised in 2007, but commitment to the idea has varied over time. Some insiders are sceptical about the most recent proposal.
“We should understand that the proposal of equity injection into a debt-ridden state-run agency by another state-run agency is a strategy to ruin them both,” Bimal Wagle, a former head of the now-dissolved Public Enterprises Board, told the Kathmandu Post.
Even some former Nepal Airlines officials are concerned about the divestment plan, telling the newspaper that the board approved it without knowing the airline’s total assets. Its paid-up capital currently stands at NPR340 million rupees (USD2.95 million), which means that a 25% stake will amount to NPR85 million (USD737,500). According to the Kathmandu Post, Nepal Airlines is currently indebted to the tune of NPR41.73 billion (USD362 million), owes more than NPR3.66 billion (USD32 million) in interest annually, and continues to post losses.
