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Kathmandu Thursday June 22, 2000 Ahsad 08, 2057.
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PAC directs
govt to scrap RJ-100 deal
By a Post Reporter
KATHMANDU, June 21 - The parliamentary Public
Accounts Committee (PAC) today directed the government to scrap the deal proposed to
purchase an Avro RJ-100 jet aircraft for the Royal Nepal Army (RNA).
PAC investigating the Rs. 2.31 billion (US$
33 million) deal to purchase the aircraft said it was asking the government to cancel the
deal after its investigation revealed irregularities had taken place and laws had been
violated.
"Since there was irregularities in the
decision and process to purchase the aircraft, PAC has asked the government to scrap deals
like this and has directed the government to reach decisions and perform within the
boundaries of the law," PAC Chairman Subash Nemwang said.
RNA and the Ministry of Defence had signed an
agreement with the British Aerospace Systems, manufacturer of RJ-100, without calling for
global bids and checking market for similar aircrafts manufactured by other companies as
required by the Financial Regulations.
Defence Ministry officials were summoned by
the committee to inquire about the shady deal to purchase aircraft for RNA at an inflated
cost of Rs. 2.31 billion (US$ 33 million) which is Rs. 560 million (US$ 8 million) over
the actual price.
"Besides failing to call bids and award
the deal through open competition, the deal process lacked transparency and the government
had given financial guarantee which is against the provisions in the constitution,"
Nemwang said after the meeting today.
The decision to purchase the RJ100 aircraft
without even calling a tender was first endorsed by the government of Nepali Congress and
CPN-UML. The then Finance Ministry Bharat Mohan Adhikari had single handedly decided to
provide the Financial guarantee. At that time the parliament had been dissolved and two
major parties - NC and CPN-UML, were in the government formed to conduct the general
elections.
Provisions in the constitution bar the
government from directly giving any guarantee or loans unless the situation is
extraordinary.
"The guarantee given by the government
is against the Loan and Guarantee Act of 1968 and the agreement with the manufacturer had
been reached without even first setting financial sources for the deal," Nemwang
said.
PAC alleged the government of directly
interfering by directing the financial institutes (commercial banks) to grant the loan.
"How can the Finance Ministry responsible for enforcing the financial laws violate
the very laws it is supposed to protect," MP Lilamani Pokhrel said.
Finance Secretary Bimal Koirala admitted that
government had interfered by this move. "There has definitely been interference by
the government in the loan process by the government guarantee," Koirala told PAC.
Secretary at the Ministry of Defence Keshav
Rajbhandari continued to plead with the committee not to block the deal since the breach
of contract could end up costing both in monetary and credibility terms.
"Cancelling the deal would result in the
company seeking financial compensation and would damage the credibility of the government
as the guarantor and RNA as the purchaser," Rajbhandari said.
Last week, PAC had asked the Defence Ministry
to halt the process of opening Letter of Credit (LC) towards purchasing the aircraft while
the committee reviews documents and investigates the case.
The decision to purchase this aircraft was
made without calling bids as required by the financial regulations. RNA had directly asked
the company for quotation for this particular aircraft and forwarded the deal.
RNA’s plan to purchase the aircraft was
first endorsed by the caretaker coalition government of Nepali Congress and CPN-UML just
before the last general election held on May last year. The decision was shelved after the
news on the controversial decision created a firestorm against it.
After assuming office former premier Krishna
Prasad Bhattarai had ruled out the purchase of the aircraft. He was then quoted as saying
that there would be no purchase of the RJ-100. However, Bhattarai government didn’t
revoke the former government’s decision, neither the Finance Ministry repealed the
decision taken by the then Finance Minister Bharat Mohan Adhikari to issue bank guarantee
for the aircraft purchase.
Defending the deal, the Defence Secretary
said RNA is targeting to pay off the loan in eight years by using the craft for commercial
purposes too.
Though RJ100 could make trips to as far as
Bangkok and Dubai, his type of aircraft powered by four jet engines can only land at
Kathmandu, Bhairahawa, Biratnagar and Nepalgunj with full load. With a lighter load, it
could also land at Bharatpur, Jhapa and Pokhara airports.
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