January 24: The state-owned Nepal Airlines Corporation (NAC) has started the process of seeking additional loans for various purposes. The NAC is looking for lenders to pay the debt of the existing aircraft, buy more aircraft and build a hangar.

The debt-ridden Nepal Airlines Corporation issued an Expression of Interest (EOI) on Tuesday after making a financial statement of Rs 135 billion for the specific purpose. Accordingly, national and international companies can submit proposals for the loan.

According to NAC Spokesperson Ramesh Paudel, the debt of the company is now more than Rs 48 billion. The NAC’s debt liability for the purchase of four aircraft in 2015 and the interest on the loans alone stand almost Rs 50 billion.

The NAC plans to pay the outstanding debt and buy new aircraft with the new loan.

According to the NAC, the new loan will mostly be utilized to buy new aircraft. The NAC requires an estimated loan of Rs 75 billion to buy new aircraft, Rs 55 billion to pay off the existing debt and Rs 5 billion to build the hangar.

The NAC, which is under severe pressure due to lack of capital, increasing debt burden and lack of aircraft, has started the process of taking loans at subsidized interest rates.

According to Spokesperson Paudel, the interest rate of the loans taken from the current lenders, including the Employee Provident Fund and the Citizens' Investment Trust, is expensive.

"As the interest rate of the loan is high, we are forced to pay an annual installment of Rs 3.5 billion for the interest alone," said Paudel, “Since the interest is expensive, we are seeking concessional loans to 'swap' the existing loan."

Paudel said that it is possible to get loan at an interest rate of less than 5 percent at the international level. If the NAC gets the loan, it plans to clear the debt to the EPF and CIT.

"The first priority is to pay the loan of EPF and CIT."

Committees and working groups formed by the government at various times for the reform of the corporation had also suggested increasing business or taking concessional loans to repay the debt.

The NAC is less likely to clear its debts with the existing aircraft it has.

Therefore, the NAC is opting to for a new alternative.

However, experts in this field doubt that the NAC will be able to clear such a large debt with the current management and conditions.

Shankar Prasad Adhikari, the former secretary of Nepal Government, says that it would be good to get a loan at a cheap interest rate, but it is not possible to get a loan in the current situation.

"I don't see the ideal condition for getting a loan at the moment," said the official, "Some external organizations and agents have shown interest to provide loan at a subsidized rate. If the government gives the guarantee, there is a possibility of getting a loan, but looking at all the financial conditions of the organization (NAC), who will give the loan?”