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Nepal army runs up $26.5 million debt to Indian firms

2005-12-27 Kathmandu: Over 20 private companies in India have not been paid dues amounting to nearly $26.5 million for military equipment purchased from them by the Nepalese army.

As part of its military aid to the Royal Nepalese Army, India had been providing arms, ammunition, heavy vehicles, ambulances, helicopters, night-vision equipment, concertina wire coils and other equipment at 70 percent subsidy to help it fight the Maoist insurgency.

Between 2002 and 2005, New Delhi provided the RNA with supplies worth over Rs.5 billion ($110.7 million). The understanding was that the cash-strapped RNA would pay back roughly one-third of the amount, or about Rs.1.2 billion.

New Delhi had obtained some of the supplies from private Indian companies.

These include vehicle manufacturers Tata Motors, Mahindra and Mahindra, Ashok Leyland and Maruti, Bangalore's Hindustan Aeronautics Ltd, that supplied two indigenously manufactured helicopters fitted with night vision equipment, and New Delhi's Star Wires that provided concertina wire coils.

However, more than 18 months later, the RNA is yet to make any payment. The irate companies are pressing New Delhi for payment. Some have even threatened to take the government of India to court.

What has added insult to the injury is that while the RNA has not cleared its dues to India, it has recently paid hard cash to buy ammunition and grenades from China.

After floating a global tender this year, when India suspended lethal military supplies to Nepal to show its concern over King Gyanendra seizing power with the help of the army, the RNA struck a deal with Beijing-based Poly Technologies Incorporated to buy bullets and grenades.

The deal was struck in summer and the money - over $800,000 - was paid soon after that.

Last month, the Indian Express reported that Nepal had bought 4.2 million rounds of 7.62 mm bullets, 80,000 grenades and 12,000 AK-47s from China. Sources at Nepal Rastra Bank, Nepal's top bank, confirmed the RNA had paid over $80,000 for the bullets and 18,000 grenades.

If that report is right, it would mean further consignments arriving in Kathmandu and the RNA parting with still more dollars to make down payments.

That would add to the ire of the Indian companies who, following Indian Prime Minister Manmohan Singh's meeting with Gyanendra in Jakarta, agreed to send a fresh convoy of vehicles for the RNA despite stiff opposition from India's left parties.

Though the convoy reached Nepal around May/June, the RNA has not loosened its purse strings so far.