KATHMANDU, August 2: Nepal Airlines Corporation (NAC) has four years remaining to repay the loan taken from the Employee Provident Fund (EPF) to purchase a narrow-body aircraft of Airbus company aimed at expanding international flight operations. On June 18, 2013, NAC secured a Rs 9.98 billion loan from the EPF, backed by a government guarantee of Rs 10 billion, with a commitment to pay installments every three months over 15 years.

In addition, on June 11, 2017, NAC signed another agreement with the EPF for a Rs 11.99 billion loan, with a guaranteed of Rs 12 billion from the government, to acquire a wide-body aircraft of Airbus. In total, EPF provided NAC with Rs 21.97 billion for aircraft purchases. According to EPF spokesperson Damodar Prasad Subedi, NAC paid Rs 1.62 billion in the last fiscal year (FY 2080/81). However, despite the payments, NAC’s debt obligations are increasing, with Rs 28.87 billion still owed to EPF. The repayment deadline for the wide-body aircraft loan is eight years away.

NAC also secured a Rs 12 billion loan from the Citizen Investment Trust (CIT) to purchase a wide-body aircraft, with a similar 15-year repayment term. However, NAC’s debt to both EPF and CIT has grown instead of decreasing, prompting the corporation to lobby for an extension of the repayment period and interest waivers for the time impacted by the coronavirus pandemic. NAC officials say the state-owned airliner has formally requested both EPF and CIT to increase the number of installments and facilitate easier repayment terms, but no agreement has been reached.

Meanwhile, NAC is seeking new lenders to manage existing debts, purchase additional aircraft, and build a hangar, with an estimated requirement of Rs 135 billion. Of this, Rs 55 billion is intended for managing aircraft-related debt. NAC argues that the current interest rates—10 percent from EPF and 9 percent from CIT—are high and is looking for loans at subsidized rates.

EPF confirmed that NAC has requested an extension of the repayment period and an interest waiver. However, no official decisions have been made, and it remains unclear when or how much exemption was requested. CIT Information Officer Uddhav Silwal on the other hand mentioned that they have not received any formal request from NAC regarding an installment extension.

During the pandemic, NAC proposed an interest exemption to CIT, but the board of directors did not take any decision on this matter. As of the last fiscal year, NAC’s outstanding principal and interest to CIT amounted to Rs 19.50 billion. Despite an agreement to pay Rs 400 million in quarterly installments, NAC could not meet this obligation, and the installment amount has now risen to Rs 720 million. NAC paid Rs 400 million in the last fiscal year, but the total arrears to CIT has reached Rs 19.39 billion as of mid-June.

Subedi of EPF emphasized that the maximum repayment period for the loans cannot exceed 15 years, in accordance with current rules. The 61st annual report of the Auditor General noted that NAC has not fully paid the interest, leading to an increase in the principal amount due to a decision by the board of directors to capitalize the interest owed to EPF.