Nepalese troops Monday recovered 18 bodies from the snow-blanketed wreckage of a plane that crashed into a hillside, the latest disaster to hit the country's internationally-blacklisted airlines.

Body parts and debris from the Nepal Airlines plane, which was carrying 15 passengers and three crew, were found scattered in a village next to the scene of Sunday's crash in the mountainous western region.

Rescuers dug through snow that had blanketed passengers' bodies overnight in Arghakhanchi district, 226 kilometres (140 miles) west of the capital, a police official at the scene said.

"It was horrible, we found burned body parts. Only eight people had undamaged faces," local police official Kiran Khatri told AFP in a phone interview.

The plane's black box flight recorder was also found as the government announced an investigation into the cause of the tragedy, Mohan Krishna Sapkota, spokesman for the tourism and civil aviation ministry, told AFP.

"The government has formed a four-member probe team to investigate the accident," Sapkota said, adding that investigators would report within two months.

The Twin Otter propeller plane, carrying locals and one passenger from Denmark, lost contact with air traffic controllers shortly after taking off from the popular tourist town of Pokhara on Sunday afternoon.

The state-run carrier's aircraft, in regular use since 1971, encountered heavy rain en route to the town of Jumla, 353 kilometres west of Kathmandu.

The torrential downpour eventually forced helicopters to stop their hunt for the plane on Sunday.

Police resumed their search at first light on Monday, finally spotting scattered pieces of the wreckage during an aerial search of Arghakhanchi.

- Poor safety record -

The crash, which left the aircraft shattered into small parts, comes only weeks after all the country's airlines were banned from flying to the European Union.

Former finance minister Ram Sharan Mahat told AFP it could not have come at a worse time.

"The European Union has already questioned our safety. So this accident is more damaging for us.

"We have to be serious about improving our safety records," Mahat said.

An airline spokesman said engineers had refurbished the plane in recent weeks, leaving it in good condition.

"The preliminary report shows that the cause of the crash was the bad weather," said spokesman Ram Hari Sharma.

"When the plane took off from Pokhara airport the weather condition was fine", Sharma said.

"We cannot predict when the clouds cover the land."

But Kathmandu-based aviation expert Hemant Arjyal said the accident made it "pretty clear that our safety has not been up to the standards".

"It's well below the world average," Arjyal told AFP.

The Himalayan nation, which counts tourism as a major contributor to its economy, has suffered a number of air crashes in recent years, which have usually been attributed to inexperienced pilots, poor management and inadequate maintenance.

Arjyal, an engineer and member of the non-profit Nepal National Aviation Council, blamed the reluctance of authorities to investigate accidents thoroughly.

"There is a tendency to investigate only if all people on board have died in the crash," he said.

"This makes the job of the investigating officials easy. Now you can blame the dead crew."

Instead, he said, officials needed to probe non-fatal accidents as well to understand the reasons behind Nepal's appalling safety record.

A Chinese tourist and a local pilot were killed when an ultra-light aircraft crashed into a hill in Pokhara last October.

Fifteen people were killed at the same airport in May 2012 when a plane carrying Indian pilgrims crashed into a mountain.

In September 2012, 19 people including seven Britons and four Chinese were killed after an Everest-bound plane crashed minutes after taking off from Kathmandu in an accident which the government blamed on a panic-stricken pilot.

At the time of the blacklisting last December, EU Transport Commissioner Siim Kallas said the country's safety record "does not leave us any other choice".

Government officials said the ban was "unfortunate" and came after months spent on upgrading safety and monitoring aircraft.

"Officials say that they have improved. If we have improved, there should have been no crash at all yesterday," said Arjyal.