As part of the arrangement the government of Nepal will use the rest of the

concessional loan to pay for purchase of one Chinese MA-60 turboprop aircraft,

the source said.

Nepal had placed an order for two of the turboprops during the royal regime and

the government had paid an advance of US $ 5 million.

After the regime change in April 2006, the government decided to cancel the

order and asked the China National Aero Technology Import and Export advance.

                                                                                                              
However, in a strongly worded letter sent to Nepal in September 2006, the

Chinese government said that cancellation of the order  would "seriously affect

bilateral ties", and there was strong Chinese pressure to use part of the

concessional credit to pay for the aircraft.

"We have settled on buying one of the aircraft with part of the concessional

credit. "said the source. The aircraft will cost Nepal US $ 13 million to 14 million,

the source said.