Nepal's China plane deal off

In May 2005, the royalist government started talks with China to buy Beijing's indigenously manufactured MA60 aircraft as well as Z9A helicopters.

A mounting funds crunch has shot down Nepal's bid to buy aircraft from China.

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After its major arms and aircraft donors India, the US and Britain stopped lethal military aid last year to show concern at King Gyanendra's power grab, Kathmandu decided to open parleys with Beijing for buying fresh stocks.

In May 2005, the royalist government started talks with China to buy Beijing's indigenously manufactured MA60 aircraft as well as Z9A helicopters.

However, nearly a year later, the deal seems to have come unstuck despite Chinese company Xi'an Aircraft Industry Company's generous buy-two-get-one-free offer.

Nepal needs helicopters to fight the escalating Maoist insurgency and long-distance aircraft, like Boeings, for the national carrier Royal Nepal Airlines as well as Gyanendra's trips abroad.

When Nepal's defence secretary Bishnu Upreti went on an official visit to China in August 2005, he signed a memorandum of understanding (MoU) with Xi'an to buy just two MA60s.

However, while the sale was a good bargain for the Chinese company, Nepal's advantage is questionable.

To stave off guerrilla attacks by the Maoists, the Royal Nepalese Army needs helicopters that can land anywhere on difficult terrain. The MA60 needs a runway.

Moreover, the MA60s are certified only by the China Civil Aviation Authority and not by any other international aviation authority, which makes it difficult to insure them.

The Chinese aviation industry, which is planning to sell at least 300 MA60s to foreign buyers by 2020, has come up with a buy-two-get-one-free scheme to push the jets past European and American competitors with better technical edge.

Although Xi'an says it has identified 100 potential buyers in 24 countries, the only deal that has gone through so far has been to Zimbabwe, which last year bought two MA60s from China and got one free.

After Zimbabwe, Nepal's name was disclosed as the only other foreign buyer. However, since the signing of the MoU last year, Nepal has neither made any payment nor taken delivery of the aircraft.

Informed sources said although Nepal was to pay about $12 million for two aircraft, it has still not been able to make any payment due to an acute funds crunch.

Recently, it forked out nearly $25 million to buy bullets from Israel and rifles from China.

A Nepali economist recently issued a warning, saying the government would go bankrupt by May. The finance ministry issued a quick denial saying the kingdom's expenditure and revenue were on track.