Airfares hiked, airlines defy CAAN order

By Satyendra Timilsina

KATHMANDU, April 7:Following last week’s shrug-off from the Civil Aviation Authority of Nepal (CAAN) over the proposal of airliners to hike the airfare second time hardly within a span of two months, the domestic airlines operated flights at increased fares today.

"We flew our aircraft today as usual. However, the charges were higher," said Kishor Silwal, First Vice President of Airlines Operators Association of Nepal (AOAN). The fare was hiked by 7 to 12 per cent. In absolute terms, the fare increased from a minimum of Rs 100, to a maximum of Rs 300, depending on the flight sector.

While fares from Kathmandu to Bhairahawa, Bhadrapur and Biratnagar each was raised by Rs 200, the fares for Kathmandu-Nepalgunj and Kathmandu-Pokhara sectors was hiked by Rs 300 and by Rs 100 respectively. Likewise, fares for mountain flight was increased by US $ 16 to US $ 127 per person.

The operators in the previous week had announced to increase the domestic airfare citing high operational costs. They had even threatened to stage strikes, if their demands were not met. However, CAAN had rejected the proposal.

CAAN had even sent a letter to operators ordering them not to increase the fares. Operators need to take due approval from the aviation authority before any revision in fares is made.

CAAN authorities, talking to The Kathmandu Post, said that it would initiate strong action against the airliners. "We will check the airfares and arrest them if necessary," said Medini Prasad Sharma, Director General of CAAN. However, CAAN will officially ask the companies to withdraw their decision before initiating any action, he added.

The recently implemented Civil Aviation Regulations authorises CAAN to revoke the Airlines Operating Licence (AOL), suspend air flight or impose fines of Rs 10,000 to Rs 50,000 on those airliners which do not follow the directions of the Authority.

Operators, however, are undeterred promising not to buckle down in front of the government to roll back the fare hike. "If the revision as made by the airliners themselves is not endorsed, and the government attempts to take action against any of the airlines, we will close down the flights immediately," said Silwal.

Nevertheless, the airlines say that they would scale down the fares only if the government slashes the hike in various fees that it had announced recently. The decision of the airlines to hike the fare came only after the government announced to revise various fee structures, including those of registration, renewal and operating licences.

The increment in airfare came hardly two months after it was first increased by 10 to 20 per cent. The government had allowed increasing the airfare last January, after repeated requests from airline operators stating that the industry would collapse, if the fares were not revised.

And immediately after the fare hike, the government with a view to providing further relief to aviation sector, included the industry into the list of sick industries. However, the different fees that aviation companies have to pay to the government were raised after the aviation sector was declared as sick.

"How can an industry that is declared sick be levied higher fees and denied any sort of adjustment in fares to cover even its operational costs?" questions Silwal.

Copper industries’ survival at stake

By Gopal Devkota

BIRGUNJ, April 7:Many Nepali copper industries are now on the verge of closure ensuing the recent renewal of the 1996 Nepal-India Trade Treaty that clamped quantitative restrictions on some principal items exported from Nepal to India.

The plight of the Nepali industries is directly a result of the quantitative restrictions that India imposed on the export of copper products during the Treaty renewal. The renewed Treaty contains provisions that restrict the export of copper products from Nepal to India to a mere 7,500 tons a year.

Since the export of copper products to India has already exceeded the 7,500-ton limit in the first eight months of the current fiscal year, as many as 46 copper industries around the country are now facing closure. Five big industries in Birgunj alone closed down recently.

Entrepreneurs are of the view that most copper industries in the country will simply die out, if no market is found for their products. With the new Treaty, Nepali copper industries are not in a position to operate at higher capacities, directly resulting in losses.

"If no changes are made in the Treaty, and the quota is not increased, more than 90 per cent of the copper industries will close down in the next one month," says manager of Narayani Metal Industry, Ashok Vaidya, whose industry has already closed down.

He partly blames the Nepal government for the current turmoil in the copper industries. "The government should have renewed the Treaty and agreed to the quotas proposed by India by looking into the export figures of the past," he says.

The situation is further aggravated by lack of domestic market for the output. "There is no domestic market for copper products. All the industries were established keeping in sight the huge potential of the Indian market. Now the billions of investment and thousands of jobs are at risk," adds Vaidya.

Over 9,199 tons of copper products was exported to India in the first eight months of the current fiscal year through the Birgunj customs alone, surpassing the maximum exportable limit as stipulated by the Nepal-India Trade Treaty. The exports last fiscal year had been around 13,000 tons from Birgunj. However, if the export figures of Biratnagar and Bhairahawa are added, the export of copper products exceeds twenty five thousand tons annually.

"For an industry whose exports stand at around 25,000 tons each year, clamping quota of just 7,500 tons was not practical. The quota is an attempt to close down Nepali industries," opines trader Satyanarayan Kyal.

Establishing a single copper industry requires capital ranging from forty to fifty million rupees. The total investment in the sector presently amounts to over Rs 2 billion. Also, they provide employment to over 2,000 people. With the industries now facing survival threats, the investment into the sector and the employment generated by it too are facing serious threats.

Most of the copper industries were established after the signing of the 1996 Treaty that contained provisions allowing duty- and quota-free market access to all Nepali products, except those in the negative list, to India. However, India claimed that increasing export of copper products from Nepal was injuring their domestic industries, which is the sole reason for clamping the quantitative restrictions.

Other items facing quantitative restrictions are vegetable ghee at one hundred thousand tons, acrylic yarn at 10,000 tons and zinc oxide at 2,500 tons. These four industries account to almost twenty per cent of the total exports from Nepal to India.

Foreign currency reserve growth impressive

Post Report

KATHMANDU, April 7 : Despite shrinking exports and troubled tourism industry, two major forex earners, the total foreign currency reserve recorded an impressive surge of Rs 4.09 billion within a month, thanks to robust increment in the inflow of remittances into the country through official channel.

According to latest figures complied by the Nepal Rastra Bank (NRB), the total reserve of foreign currencies by mid-March surged to a new height of Rs 106.35 billion, which was just Rs 102.26 billion in mid-February. "The current amount of the reserve is an all time high," said an official of the central bank.

Of the total reserve, the amount of convertible currency recorded a remarkable surge of Rs 3.28 billion, which is an increment of almost 4.5 per cent compared to similar figures of the last month. The reserve of the convertible currency currently accounts 74.5 per cent of the total reserve whereas such ratio was 73.8 per cent last month.

The growing inflow of the hard foreign currency through the official channel is the main reason that largely prevented the foreign currency reserve from tumbling down massively due to dwindling exports and shrinking domestic tourism industry, the two major traditional sources of the foreign currencies.

The latest Balance of Payments figure of the central bank also reveals an increment of 23.7 per cent in transfer net propped up mainly by rise in the inflow of private remittances. During the first four months of the current fiscal year, the private inward transfer increased by 30 per cent to touch Rs 6.4 billion whereas such figure two years ago was just Rs 4.10 billion.

Foreign employment has been a major attraction for the Nepali youths for income generation. According to an official data, the total number of Nepali working in foreign countries has touched 200,000. Saudi Arabia has been the most popular destination that has already absorbed 75,000 people followed by Kuwait and Malaysia.

Economy, Finance and Market

By Supa Upadhyay

Domestic money market:

The Average Weighted Discount Rate (AWDR) of 91-day Treasury Bills (TBs) dipped marginally by 04 basis points to 5.01 percent and 364-day Treasury Bills (TBs) dipped sharply by 24 basis points to 5.14 percent compared to previous week. The rupee was traded higher at NPR 98.77 and lower at NPR 98.75 for 91-day TBs and higher at NPR 95.12 and lower at NPR 95.09 for 364-day TBs. The NRB had received 38 bids worth NPR 3487.090 million against the notified amount NPR 789.345 million for 91-day TBs and 28 bids worth NPR 1770 million against the notified amount NPR 550 million for 91-day TBs. The Repo rates for member banks and institutions have been quoted at 6.0150 for the trading days 09 to 15 April 2002 for 91-day TBs. The outright purchase facility for bank, institutions and other on TBs is also available. In the regular weekly auction, the NRB is going to issue 91-day TBs worth NPR 750 million and the NRB is going to issue 364-day TBs worth NPR 600 million on April 09, 2002.

Domestic capital market:

Thw stock market resumed on a distinctly firm note on the back of speculative purchases. The NEPSE Index-100 rose by 10.12 points over the week. The Index opened higher at 201.06 improved sharply in second and third day to 211.11 but it fell in fourth day and eventually closed at 208.93. This week, trading was estimated at 22989 shares valued NPR 82.5 million compared to 38622 shares valued NPR 13.6 million of previous week. This week, the index of Production Sector, Commercial Banks, Development Bank, Finance Sector, and Insurance Sector improved while, Hotel Sector and Business Sector remains unchanged. Out of thirty-nine traded companies, eighteen companies improved, eleven companies lost and ten traded companies remain unchanged at their previous prices. Bank of Kathmandu, Everest Bank and Nepal Indosuez Bank registered the first, the second and the third most traded companies trading 4645, 1623 and 1582 shares respectively. Shares of Nabil Bank, Nepal Indosuez Bank, Standard Chartered Bank, Nepal B’desh Bank, Everest Bank, Bank of Kathmandu, Nepal B’desh Finance and Nepal Development Bank were able to trade in all five working days. Likewise, Himalayan Bank, Nepal SBI Bank, NIC Bank and Lumbini Finance were able to trade in four working days.

Forex round-up:

The USD weakened against all its major trading partners over the week on Middle-East tensions and weakness in US equities data that have raised questions about the pace of the economic recovery. The focus has now turned to the jobless figures. Nonetheless, the data added fuel to a dollar selling that started during Asian trading and accelerated rapidly in New York trading. As expected, The European Central Bank and Bank of England left key interest rates unchanged, although the ECB did note rising oil prices may increase upside risks to inflation in the euro zone. The interest rate decisions had little impact on currencies, but some strong European data have helped the European currencies and painted a more optimistic recovery picture. The closely watched Purchasing Managers Index for services activity showed the sector expanded in March for a third straight month which helped support the euro.

The INR slipped against the dollar over the week. The NPR also buoyed by the INR fell by 20 paisa against the dollar over the week.