The subcommittee formed by the Public Accounts Committee (PAC) of the parliament to probe procurement of two wide-body planes by the Nepal Airlines Corporation (NAC) has concluded there was corruption of Rs 4.3556 billion during the procurement process.
The subcommittee formed under Nepali Congress (NC) lawmaker Rajan KC has mentioned that the corruption was done in different stages with involvement of different persons.
The largest irregularities occurred in the price of Airbus airplanes, according to the subcommittee's report. It points how the cost price was calculated with bad intention by taking the price of eight years earlier and adding annual price escalation on that instead of taking the then current price and deducting the discount amount.
The cost price of new planes is determined at US$ 118,163,773. But bids were invited for airplanes manufactured after 2014 and that have clocked 1,000 flight hours.
The report mentions that the price of airplanes would be US$ 93,047,434.80 taking the price of US$ 88,099,317 for 216 proposed by the proposal evaluation subcommittee and adding price escalation of 2.7699 percent determined by the NAC management. But the price of US$ 104.80 million proposed by AAR Inc was accepted ignoring that price, the report points.
"The NAC, in this way, suffered losses of US$ 23.60 million at the rate US$ 11.80 million on each plane," the report reads.
The report points that there have been additional irregularities while reducing the maximum takeoff weight of the planes. AAR Inc had proposed to sell Airbus A330-200 planes with maximum takeoff weight of 242 tons. But planes with maximum takeoff weight of 230 tons were procured by reducing the capacity while signing the memorandum of understanding and procurement agreement.
"The company that came third after Request for Proposal (RFP) was invited had mentioned that it has planes with maximum takeoff weight of 233 tons, and had stated that the cost price would rise by US$ 350,000 for every ton if planes with maximum takeoff weight of 242 tons were needed. The NAC, on that basis, suffered losses of US$ 8.40 million while procuring two planes with maximum takeoff weight of 230 tons," the report concludes.
More irregularities were done by keeping the provision of price escalation after accepting the proposal.
The NAC board instead of cutting depreciation while procuring old planes has put the maximum price escalation of 2.7699 percent as per the clause for escalation that is applicable only for manufacturing companies while procuring new planes, the report points.
"The NAC has been made to suffer loss of around US$ 6.8 million by instructing the NAC management to keep the provision of maximum price escalation of 2.7699 percent applicable only on the price determined by Airbus company for that year after the proposal was affected in a way that violates the Public Procurement Act," the report reads.
The total amount of Rs 4.3556 billion was arrived by converting the three amounts in US dollars to Nepali currency and adding other smaller misappropriation including Rs 10 million spent during the foreign trips of different persons to observe wide-body planes.
