Reforming Regulation: Nepal’s Aviation Sector Set for Historic Restructuring

KATHMANDU, Dec 23:The Ministry of Culture, Tourism, and Civil Aviation is preparing to introduce a bill in Parliament that aims to restructure Nepal's aviation sector. Minister Badri Pandey announced that the bill seeks to split the Civil Aviation Authority of Nepal (CAAN) into two distinct entities: a regulatory body and a service provider.  

Currently, CAAN handles both regulatory oversight and service provision, a setup often criticized for inefficiencies and conflicts of interest. The proposed reform will separate these functions, with the regulatory body focusing on safety and compliance, and the service provider managing airport operations and air traffic services.  

The proposed bill to restructure Nepal’s aviation sector by separating the regulatory and service-provider roles has faced multiple hurdles in the past. Initially drafted years ago as part of efforts to align with International Civil Aviation Organization (ICAO) recommendations, the bill has been repeatedly delayed or rejected due to political instability, lack of consensus among stakeholders, and concerns over implementation costs. 

Critics within the government and aviation sector had expressed skepticism about the necessity of dividing the Civil Aviation Authority of Nepal (CAAN), arguing that the country’s aviation issues stemmed more from poor governance and resource limitations than from structural flaws. These challenges, coupled with competing priorities in Parliament, prevented the bill from progressing until recent international pressure reignited the push for reform.  

The restructuring aligns with recommendations from the International Civil Aviation Organization (ICAO) and addresses one of the key conditions set by the European Union for lifting its airspace ban on Nepali airlines. Since 2013, the EU has prohibited Nepali airlines from operating in its territory due to safety concerns linked to CAAN's dual responsibilities. The Yeti Airlines, Saurya Airlines and Air Dynasty helicopter crashes have added further distrust. 
  

The bill, if passed, will initiate the formation of the two entities, marking a crucial step toward improving safety standards and regaining global confidence in Nepal’s aviation industry.