Fiscal Nepal
First Business News Portal in English from Nepal
KATHMANDU: Nepal has moved forward with a legislative process to significantly increase compensation for passengers killed, seriously injured or permanently disabled in domestic aircraft accidents, with the proposed law seeking to raise the maximum compensation from the current $20,000 to up to $100,000 per passenger.
The proposed increase is part of a new bill aimed at strengthening passenger rights and airline liability in Nepal’s aviation sector. The bill has reportedly been forwarded by the Ministry of Culture, Tourism and Civil Aviation to the Cabinet following the formation of the new government. It is expected to go through the Cabinet and Parliament before it can be enacted and implemented.
A ministry official familiar with the proposal said the bill would introduce the first comprehensive legal framework focused specifically on passenger insurance and liability in domestic air transport.
“The bill will now go through the Cabinet and then Parliament for approval before it comes into implementation. It is the first bill focused on passenger rights, insurance and liability. The proposed compensation provisions will apply to both airplanes and helicopters,” the official said.
Under the proposed legislation, domestic airlines and helicopter operators could be required to provide compensation of up to $100,000 per passenger in cases involving death, severe injury or permanent disability caused by an aircraft accident.
The proposed amount is approximately NPR 13.5 million to NPR 13.6 million per passenger, based on the exchange rate referenced in the proposal.
Currently, Nepal’s domestic aviation compensation framework provides for compensation of up to $20,000, equivalent to approximately NPR 2.7 million. If approved, the new provision would therefore represent a fivefold increase in the maximum compensation available to victims or their families.
The proposed reform is expected to bring Nepal’s domestic aviation liability framework closer to international standards while also providing greater financial protection to passengers and their families.
The ministry official said the government has considered the financial capacity of Nepali airlines while determining the proposed compensation level.
According to the official, international airlines are generally subject to passenger compensation provisions of around $175,000, while setting the same level for domestic operators could create a significant financial burden for Nepali airlines and helicopter companies.
As a result, the government has proposed $100,000 as the compensation threshold for domestic air travel.
Passenger compensation for international flights operating to and from Nepal is governed by international aviation liability standards.
Nepal ratified the 1999 Montreal Convention in 2018, bringing international air passenger liability provisions under the internationally recognized framework.
Under the Montreal Convention, compensation liability for passenger death or injury can be significantly higher than the current domestic limit, with compensation thresholds generally exceeding $160,000 to $200,000 per passenger, depending on the applicable circumstances and liability framework.
The proposed domestic aviation bill is therefore expected to narrow the gap between Nepal’s domestic and international passenger compensation regimes.
The reform comes amid growing calls for stronger passenger protection and clearer liability arrangements in Nepal’s aviation sector, particularly given the country’s challenging terrain and the risks associated with domestic air and helicopter operations.
One of the major provisions under the proposed legislation is the introduction of immediate financial relief for victims and their families following an aviation accident.
Airlines and operators would reportedly be required to provide advance payments to affected passengers or their immediate family members to cover urgent expenses.
Such payments could be used for:
The provision is intended to ensure that victims and their families do not have to wait for lengthy insurance claims or legal proceedings before receiving financial assistance.
The introduction of advance payments could become particularly important in the aftermath of major aviation accidents, when families often face immediate medical, transportation and funeral expenses.
The proposed bill also includes provisions related to passenger baggage.
Under the draft framework, compensation for lost, delayed or damaged checked baggage would be set at $20 per kilogram, subject to a maximum compensation limit of $5,000 per passenger.
The proposed provision would establish a clearer standard for compensation in cases where passengers lose their baggage or receive it in damaged condition during air travel.
The bill is also expected to establish clearer liability standards for airlines in handling passenger property and cargo.
The proposed legislation would not only address passenger compensation but also introduce stronger requirements related to third-party liability.
Airlines and aircraft operators would be required to maintain mandatory insurance coverage based on the weight of their aircraft to compensate third parties who may suffer damage or losses on the ground as a result of an aircraft accident.
The provision is designed to protect people and property that may be affected by aviation accidents even when they are not passengers or crew members.
This could include individuals, businesses, buildings, vehicles and other property affected by an aircraft accident outside the airport or aircraft operating area.
The draft legislation also proposes a mechanism for periodically reviewing compensation limits.
Under the proposed framework, the government would review and adjust compensation thresholds every 10 years, taking into consideration inflation, economic conditions and changes in the cost of living.
Such a review mechanism could prevent compensation limits from becoming outdated over time.
The current compensation ceiling of $20,000 was established under a much older aviation liability framework. With inflation and rising medical and living costs, aviation stakeholders have increasingly argued that compensation levels need to be periodically revised.
The proposed 10-year review mechanism is intended to ensure that passenger compensation remains relevant to changing economic conditions.
Nepal currently has several airlines operating domestic passenger services.
The domestic aviation market includes Yeti Airlines, Buddha Air, Shree Airlines, Tara Air, Summit Air, Sita Air and Nepal Airlines.
The helicopter sector also has a significant presence in Nepal’s aviation industry, with operators including Kailash Helicopter Services, Simrik Air, Shree Airlines, Prabhu Helicopter, Heli Everest, Air Dynasty, Fishtail Air, Mountain Helicopters, Manang Air, Mustang Helicopter and Annapurna Helicopters, among others.
However, some airlines have remained grounded for extended periods. Guna Airlines and Saurya Airlines have been among the operators facing prolonged grounding, highlighting the financial, regulatory and operational challenges confronting Nepal’s aviation industry.
The proposed increase in passenger compensation could therefore have a direct impact on the insurance and operating costs of domestic airlines and helicopter companies.
While the proposed bill is expected to strengthen passenger rights, aviation operators may face increased financial obligations if it is implemented.
Raising the maximum compensation from $20,000 to $100,000 could increase the cost of insurance premiums for domestic airlines and helicopter operators. The impact could be particularly significant for smaller operators with limited financial capacity.
The government, however, appears to have attempted to balance passenger protection with the financial sustainability of domestic aviation companies by setting the proposed domestic compensation level below the liability framework applicable to international air travel.
The reform could also encourage airlines to strengthen their safety management systems and risk mitigation measures as higher liability exposure could increase the financial consequences of aviation accidents.
If approved by the Cabinet and Parliament, the proposed legislation would represent a major shift in Nepal’s domestic aviation passenger rights framework.
The proposed increase in compensation, advance financial assistance, baggage liability, third-party insurance and periodic review of compensation limits could provide passengers with substantially stronger legal and financial protection.
For families affected by aviation accidents, the proposed increase from $20,000 to $100,000 could be particularly significant.
However, the effectiveness of the new framework will ultimately depend on its implementation, the ability of airlines and insurers to meet their obligations, and the government’s enforcement of the proposed provisions.
The bill must now pass through the remaining legislative process before the proposed provisions can come into force. Once enacted, Nepal’s domestic aviation industry would face a new passenger liability regime designed to provide greater financial protection while bringing domestic aviation regulations closer to international practices.
The proposed legislation is therefore being viewed as an important step toward modernizing Nepal’s aviation law and strengthening the rights of passengers traveling by both fixed-wing aircraft and helicopters.
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