Proposal to Raise Air Passenger Insurance Liability Fivefold

Kathmandu — The government is preparing to legally guarantee air passengers’ rights and compensation. Minister for Culture, Tourism and Civil Aviation Khadak Raj Paudel said minimum compensation and passenger rights in cases such as flight cancellations, delays and lost baggage are being incorporated into law.

Minister Paudel made the statement during a theoretical discussion on the ‘Domestic Air Service Liability Bill, 2026’ at a meeting of the National Assembly’s Legislation Management Committee held at Singha Durbar on Tuesday.

According to Paudel, the bill seeks to establish a legal framework governing the liabilities of domestic air service providers, as well as passengers’ rights and compensation. The government has proposed increasing the insurance liability currently set at around USD 20,000 to USD 100,000. Paudel said the increase is being proposed in line with international standards for air passenger insurance coverage.

The proposed insurance liability will be five times higher than under the current arrangement. This is expected to increase the amount available through insurance and compensation in cases involving passenger fatalities or other losses resulting from air accidents.

Minister Paudel said the increase in insurance liability could raise operating costs for airlines, which could eventually affect airfares. He said stakeholders should therefore remain mindful of the potential impact on ticket prices.

Legal Basis for Compensation to Non-Passengers

The proposed bill also seeks to address damage caused by aircraft accidents to people and property on the ground, in addition to passengers.

Minister Paudel said the bill would establish, for the first time, a legal basis for providing compensation when a non-passenger is killed or when their home or property is damaged as a result of an aircraft accident.

The government is preparing to bring liabilities arising from air accidents within a broader legal framework by covering not only passengers but also third-party risks and compensation.

Paudel said matters concerning the separation of regulatory and service-provider functions, as well as airport operations, would be addressed through a separate bill relating to the Civil Aviation Authority of Nepal.