Kathmandu: Civil Aviation Authority of Nepal (CAAN) has been accused of financially burdening the state-run Nepal Oil Corporation (NOC) by charging exorbitant land rents and other fees for the operation of aviation fuel depots at major airports, prompting allegations that the authority is treating NOC like a “milking cow.”
The controversy centres around the high rent rates CAAN is reportedly imposing for the land leased to NOC at airports across the country, including Tribhuvan International Airport (TIA) in Kathmandu, as well as facilities in Bhairahawa, Pokhara, and other regional hubs.
According to officials at the NOC, the rates far exceed standard government rent benchmarks—Rs 600 per square metre at international airports and Rs 330 at domestic ones—placing what they describe as an unsustainable financial burden on the public fuel utility.
“We are a government body accountable to the public, not a commercial entity,” said Pradeep Yadav, head of NOC’s aviation fuel depot in Sinamangal, Kathmandu. “But CAAN has treated us as if we’re a profit-making business, charging us far above the established rate.”
The dispute comes as the NOC prepares to relocate its central aviation fuel depot from Sinamangal to a new site near Guhyeshwari Golf Course, where CAAN has informally allocated 110 ropanis (approximately 56,000 square meters) of land. Based on CAAN’s current rent model, the new site could cost NOC over Rs 33 million annually—before accounting for a scheduled 10 percent biannual rent hike.
Under this model, rent would double in just seven years, prompting NOC to warn of a deepening financial crisis that could ultimately impact consumers through higher fuel prices. The state-owned oil company is already shouldering annual losses exceeding Rs 10 billion on cooking gas subsidies.
“Relocating the depot under these conditions will only increase our losses,” said Yadav.
Mounting financial pressures
In addition to land rent, CAAN collects a 0.4 percent throughput charge on aviation fuel sales at airports—an increase from the previous 0.3 percent. At TIA alone, this cost exceeds Rs 120 million annually. NOC has also accused CAAN of demanding additional fees of up to Rs 350,000 per refueler vehicle for entering airside ramps to service aircraft.
“These demands are being made under direct instructions from CAAN’s Director General, Pradeep Adhikari,” said one NOC source, who requested anonymity. “It’s clear that CAAN is operating with a profit-first mindset, even at the expense of another public body.”
Efforts by NOC to contest the fees have met limited success. While it has formally refused to pay the refueler movement fees, it continues to be charged both rent and throughput fees, adding to its growing liabilities.
The aviation authority has defended its charges as necessary, but NOC argues that its treatment violates the spirit of inter-agency cooperation within the government.
Government policies add to strain
The burden on NOC has been compounded by government policies aimed at promoting underutilized international airports. In 2024, the government announced a US$ 100 per kilolitre fuel subsidy for foreign airlines operating out of Pokhara and Bhairahawa.
NOC was instructed to sell aviation turbine fuel (ATF) at or below import cost at both airports. As of July 2025, ATF prices stood at US$ 782 per kilolitre in Pokhara and US$ 706 in Bhairahawa—compared to US$ 952 at Kathmandu’s TIA.
“The government wants us to provide subsidized fuel, while another arm of the state is extracting ever higher rents and fees from us,” an NOC executive said. “This is an unsustainable contradiction.”
NOC has completed a state-of-the-art depot in southern Pokhara on 32,915 square metres of leased land at a cost of Rs 750 million. It also continues to operate older depots in Pokhara and Bhairahawa under lease agreements with CAAN.
Scientific rent review underway
In response to the financial pressures, NOC has established a five-member committee to review and propose a more scientific and fair rent model. The committee will compare the government-determined land valuation rates and market prices between NOC’s own 32-ropani parcel in Sinamangal and the CAAN-provided site in Guhyeshwari.
NOC has argued that its land, which abuts the Ring Road in central Kathmandu, is significantly more valuable than the flood-prone Guhyeshwari site on the banks of the Bagmati River. However, CAAN has reportedly shown no interest in offering compensation or fair valuation for NOC’s Sinamangal property, which is being encroached upon for taxiway expansions.
“They are trying to take our premium land for pennies while overcharging for land that could be underwater in the next monsoon,” said one member of the rent review committee. “This is institutional exploitation.”
New rent dispute
CAAN has demanded that NOC begin paying rent for the new 110-ropani site from the date construction began, despite no formal land agreement and no active operations at the new depot. NOC has refused, arguing that rent should only be paid once fuel sales begin from the new facility.
NOC Managing Director Dr. Chandika Bhatt said, “We have made it clear to CAAN that we will not pay rent on the new site until the depot is operational. We are already paying rent for 5 ropanis at our current location.”
CAAN spokesperson Hansraj Pandey confirmed that the dispute has been referred to the Ministry of Culture, Tourism and Civil Aviation, which is expected to make a decision soon.
Pandey acknowledged that NOC’s leadership had asked for rent exemptions until the new depot becomes functional, given the high cost of maintaining two sites. “We are doing the necessary groundwork and have sent a letter to the ministry requesting relief,” he said.
As the dispute drags on, NOC warns that continued financial pressures—compounded by inter-agency conflicts—could further strain the country’s fuel supply system and deepen public losses in the name of infrastructure expansion.
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