Splitting CAAN: The Two Civil Aviation Bills Explained

The Civil Aviation Authority of Nepal (CAAN) was established on 16 Poush 2055 BS (31 December 1998) under the Civil Aviation Authority of Nepal Act, 2053, replacing the earlier Department of Civil Aviation. From the start it was given two jobs at once. It is the regulator that writes and enforces safety rules, licenses pilots, aircraft and airlines, and audits operators. It is also the service provider that runs the country's airports and delivers air traffic control and air navigation services.

That combination is the heart of the problem. When the same organisation both operates airports and grades their safety, it is effectively marking its own homework. International auditors call this a conflict of interest, because the regulator cannot credibly police services that it itself provides, and it cannot independently investigate accidents in a system it manages. Reformers argue the arrangement weakens accountability and blurs responsibility when things go wrong.

The proposed fix, known as CAAN bifurcation, is to separate the two functions into two organisations. Under the plan, CAAN would keep only the regulatory role, while a new body, the Air Service Authority of Nepal (ASAN), would take over airport operations, air navigation and other services. This is the model most modern aviation systems use, and it is the change that Nepal's international partners have been demanding for more than 15 years.

The push to create a separate aviation regulator in Nepal is driven largely by the International Civil Aviation Organization (ICAO), the United Nations aviation body, through its Universal Safety Oversight Audit Programme (USOAP). ICAO first flagged CAAN's dual regulator-and-operator structure as a concern in its 2009 audit and repeated the finding in subsequent audit cycles, including 2013, 2017 and the comprehensive audit conducted in April 2022.

ICAO's core recommendation has been consistent: ensure a clear separation of authority between service providers and operators on one side and the regulatory authority on the other. In 2013, following a run of fatal accidents, ICAO placed a Significant Safety Concern (SSC) on Nepal after the country's effective implementation of safety oversight fell below the global average. Nepal cleared that SSC in 2017, but the underlying structural problem, the mixing of regulation and operations, was never resolved.

The audits measure how well a state implements ICAO's safety standards across areas such as legislation, organisation, licensing, operations and accident investigation. Because Nepal's single-agency structure keeps scoring poorly on organisational independence, the bifurcation of CAAN has become the single most important reform ICAO wants to see, and the benchmark against which Nepal's progress is judged.

The reform is being carried out through two linked pieces of legislation, both dated 2081 BS. The first is a bill to amend and integrate the laws related to the Civil Aviation Authority of Nepal, which redefines CAAN as a pure safety and economic regulator. The second is the Bill to Establish and Manage the Air Service Authority of Nepal, which creates ASAN as the service provider responsible for airports and air navigation.

Then Minister for Culture, Tourism and Civil Aviation Badri Prasad Pandey re-registered the two bills in the House of Representatives in early February 2025 (registered on 19 Magh 2081). This was not a fresh idea. Earlier versions of the same bills had been endorsed by the National Assembly (the upper house) in August 2021, but they lapsed when the term of the previous House of Representatives ended in September 2022 without lower-house approval.

Under the tabled bills, CAAN would continue to be led by a Director General appointed by the government for a four-year term, chosen from senior CAAN officials or a joint secretary, and overseen by a board chaired by the tourism minister. ASAN would be led by an Executive Director selected through open competition, requiring a postgraduate degree and about 15 years of civil aviation experience, and governed by a separate board chaired by the tourism secretary. The ASAN bill also opens the door to public-private partnership investment in airports.

Much of the public debate has referred to a 'dual director-general' model, and it is worth clarifying what that means. In earlier framings of the reform, the ministry described the outcome as CAAN being run by two separate director-general-level heads, one responsible for regulation and one for services, so that the two functions no longer sat under a single chief executive with divided loyalties.

In the bills actually tabled, that separation is achieved through two distinct organisations rather than two directors general inside one body. CAAN, the regulator, gets its own Director General; ASAN, the operator, gets its own Executive Director. The practical effect is the same as the dual-leadership idea, that the person who runs airports is not the same person who certifies their safety, but it is delivered as a genuine institutional split.

This distinction matters because critics of half-measures have long warned that simply appointing two heads within one authority would leave the conflict of interest intact, since both would still answer to the same organisation, budget and culture. A clean split into two agencies is what ICAO and the EU have asked for, and what the 2081 bills attempt to provide.

The most tangible reason Nepal wants this reform is the European Union ban. Since 5 December 2013, all airlines certified by CAAN have been on the EU Air Safety List, meaning no Nepali carrier may operate to or within European airspace. The ban followed a series of deadly crashes, including the 2012 Sita Air accident in Kathmandu, and was rooted in doubts about the strength and independence of Nepal's safety oversight.

The European Commission reviews the list periodically, and it has repeatedly kept Nepal on it, including at updates in 2023, 2024 and again in June 2026. EU officials and technical assessors have made clear that separating CAAN's regulatory and service functions is a prerequisite for reconsideration, echoing ICAO's position. In other words, the two bills are not just domestic housekeeping; they are the ticket Nepal must punch before the EU will even review a possible removal.

Nepali officials often point to Pakistan as the template. The EU lifted its ban on Pakistan International Airlines after Pakistan restructured its civil aviation authority into separate entities for regulation, airports and accident investigation. Nepali authorities argue that passing the CAAN split bill and standing up ASAN would demonstrate the same structural commitment and reopen the door to European routes, which matters for tourism and for the national carrier's long-haul ambitions.

The bifurcation of CAAN is one of the most delayed reforms in Nepal's recent legislative history. The goal was signalled as far back as the government's 2007-08 interim plan, a draft was prepared with foreign consultancy support around 2014, and the first modern bills were registered in 2020. Across this span, roughly 15 tourism ministers have come and gone, yet the split has never been completed.

The pattern has been passage in one chamber, then withdrawal, reintroduction or lapse. The bills cleared the National Assembly in 2021 but stalled in the House of Representatives in 2022, partly because of strong resistance from CAAN's employee unions, who fear job disruption and loss of institutional weight. After the 2025 re-registration, parliamentary committees proposed substantial amendments, but political instability, including the wider turmoil around the Gen Z protest movement, again prevented the bills from advancing.

As of mid-2026 the reform remained unfinished, with the bills reported to have been sent back to the ministry for review. The government's budget for fiscal year 2083/84 BS (2026/27), announced in late May 2026, set a target of splitting CAAN by mid-January 2027, described as the first concrete deadline for the long-promised reform. Whether that deadline holds, given the reform's history, is the open question that aviation-policy watchers and Loksewa exam candidates alike are tracking.