KATHMANDU, MAY 25 -
Things may be difficult for the Civil Aviation Authority of Nepal
(Caan) in the days ahead as the interest on its loans is likely to
exceed its annual income.
Caan’s borrowing (or investment) for different projects is expected to
jump to around $400 million (around Rs 40 billion) by this year. And,
the interest on these borrowings stands at around Rs 3.2 billion
annually based on the 8 percent rate charged by the government to public
enterprises. However, Caan’s earning in the last fiscal year stood at
just Rs 3.5 billion.
According to Caan, upgradation work on the Tribhuvan International
Airport (TIA) started this year with a loan of $70 million, and three
other projects—two regional international airports in Bhairahawa and
Pokhara and reconstruction of the runway and taxiway of TIA—will begin
soon.
Caan has borrowed $68 million for the construction of the regional
international airport in Bhairahawa, and another planned international
airport in Pokhara is expected to cost $216 million. Caan is also
reconstructing the runway pavement and taxiway of TIA at a cost $28
million, based on a report of Ayesa Ingenieria of Spain.
Repeated occurrences of cracks on the runway of the country’s sole
international aerial gateway have been affecting smooth operation of
aircraft since 2011. Scores of flights have been diverted or delayed in
recent years due to the problems on the 3,050m runway.
The study report has suggested lower layers of the runway be dug up and
the foundation repaved by removing damaged asphalt layers and
substituting them with a new base and surface courses. As per the plan,
20m of the 45m width of the runway blanketed with damaged asphalt layers
should be removed.
Caan unions have been opposing the deal of the Pokhara airport saying
the loan burden could take the organisation to bankruptcy. Besides, Caan
is also investing hefty amounts in various other projects on its own.
Caan, which has racked up accumulated losses of Rs 1.15 billion since
its establishment, made a net profit of Rs 1.89 billion in the last
fiscal year and has announced bonus for staff for the first time. Its
profits in the previous fiscal stood at Rs 742 million.
“If the total loan amount is calculated, there are huge challenges
ahead,” said Caan Director General Ratish Chandra Lal Suman. “But there
are lots of opportunities after the planned projects comes into
operation,” he said, adding Caan has been devising business plans and
strategies to rationalise unproductive spending and boosting revenues.
STRATEGIC PLAN
Suman said Caan is developing two plans—an investment plan and a
five-year aviation plan. The plans include long-term strategies to make
the country’s aviation sector more competitive and money-making.
As the planned projects are likely to come into operation after
four-five years, TIA’s income will compensate all the debt. Caan plans
charging an additional Rs 1,000 per passenger (excluding VAT) as Airport
Development Tax at TIA by the start of this fiscal year. Presently, Rs
1,130 is levied as passenger service charge on international flights.
The Finance Ministry has given a go-ahead to collect the airport
development tax. “The airport development tax would increase our revenue
to around Rs 5.50 billion annually, which will be set aside to repay
the loans,” Suman said.
On April 21, 2012, the Caan board had approved charging travellers
departing from TIA a development fee to raise funds to repay its loans
and finance the ongoing maintenance projects.
The projected traffic growth at TIA will be another relief for Caan. It
has forecasted the number of domestic and international air travellers
will grow more than two-fold to 9.31 million by 2028 compared to the
movement recorded in 2011, while aircraft movement is estimated to
increase to 232,750 by 2028. Of the 54 domestic airports in the country,
34 are running regularly, but only 11 made in the last five years. Caan
has also asked the government to request China to convert the loan for
the planned airport in Pokhara into grant.
REVENUE LEAKAGE CONTROL
Curbing revenue leakage to increase cash flow and improving services
will be a daunting task for Caan. Sources said that around Rs 1 billion
goes to unproductive spending.
More than 15 percent (around Rs 500 million) of the fund goes
unaccounted, while Rs 400-500 million is wasted in unproductive sectors
like conducting feasibility study and blacktopping airports which are
not commercially viable.
“A huge amount is spent on conducting feasibility studies of airports,
which are either done under political pressure,” said Caan sources. For
example, the then Tourism Minister Lokendra Bista Magar invested around
Rs 150 million to carry out a study for a domestic airport in Nangidanda
of Banepa in 2012, but the report was never made public.
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