INSURANCE FOR CHINESE PLANES CUT BY 25%

KEDAR DAHAL

KATHMANDU, July 27

Chinese aircraft manufacturer Avic International Holding Corporation has reduced insurance premium for Chinese planes procured by the Nepal Airlines Corporation (NAC) by 25 percent. The NAC, that spends almost half its income from Chinese planes on insurance, has Monday written for renewal for a year after getting discount of 25 percent.

The NAC has been paying 4.47 percent for its MA-60 brought from China. It comes out to Rs 246,000 a day. It now will fall to Rs 185,000 a day after discount. The NAC earns up to Rs 700,000 a day from the Chinese plane at good times. The NAC paid over Rs 91 million for insurance of MA-60 last year and around Rs 30 million for Y-12. The NAC will save Rs 32.50 million a year from insurance alone including around Rs 25 million for MA-60 and around Rs 7.50 million for Y-12.

The NAC had renewed insurance until mid-July on April 25 stating that it will not be able to pay premium after that if the premium were not reduced. “We have sent letter for renewal on Monday after receiving proposal for a 25 percent discount,” NAC Spokesperson Ramhari Sharma said. “We are always in loss from Chinese planes except on some days of good income,” he added. The NAC had urged for reduction of premium stating it is high but the Chinese side had refused. It had repeatedly urged the Ministry of Culture, Tourism and Civil Aviation to talk about the issue of insurance stating that there is greater risk in domestic flights in Nepal.

MA-60 was brought on April 27, 2014 while 18-seater Y-12 arrived on November 3, 2014. The former had started flights from June 25, 2014 and the latter from December 18 that year. The NAC is currently doing insurance with a British company through the Rastriya Beema Sansthan. The NAC was unhappy with the Chinese manufacturer claiming that the insurance premium for Chinese planes is three times higher than that for Boeing and Airbus planes. The NAC has been paying just 0.55 percent in premium for its new Airbus A320 planes, and 1.5 percent for Boeing 757s.

Problems of planes to be solved by mid-October

Avic has also expressed commitment to fulfill the demands made by NAC. “The Chinese side seems ready to reduce price of spare parts, provide training and pilots by mid-October,” Sharma said.

The NAC board had written to the ministry to hold dialogue with the Chinese side to resolve problems. It had been taking a stance that process for procuring four Chinese planes will be moved forward only after its demands are met, and decided to return even the two currently in operation if the demands are not met. China has provided an MA-60 and a Y12E on grant while three Y12E and an MA-60 will be procured with Chinese soft loan. Sharma said the Chinese side has agreed to meet the demands following dialogue between the NAC and Chinese officials facilitated by the ministry.

The NAC said decision on the remaining four planes will be taken after August. China has provided Rs 6.67 billion to the NAC through Export Import (Exim) Bank of China in grant and soft loan to procure the six planes. Rs 2.94 billion out of that is grant for an MA-60 and Y-12 each, and the rest soft loan for the remaining four planes.