KATHMANDU, July 1: The government has stepped up efforts to privatise four ailing public enterprises (PEs) that have remained closed for years.
Inviting applications to hire the consultants for the property valuation for the asset management of the PEs, the Ministry of Finance (MoF) has moved forward for the privatization of the state-owned entities including Janakpur Cigarette Factory, Butwal Yarn Factory, Nepal Metal Company and Nepal Orind and Magnesite Company.
The High-Level Economic Advisory Commission formed under the leadership of former finance secretary Rameshore Khanal has also recommended scrapping out five underperforming state-owned enterprises citing them as a financial burden on the government. According to the MoF, there are currently 44 PEs, out of which 15 are running at a loss and three are inactive. The government has invested over Rs 615 billion in these enterprises; however the returns from these entities have remained pathetic.
In a MoF issued public notice for procurement of consulting service of Janakpur Cigarette Factory, the ministry has maintained the deadline of July 7 for the final submission, while the expression of interest (EOI) opening date has also been fixed for the same day. Likewise, the final date for submission and opening of the EOIs for the other three enterprises has been fixed for July 11, 2025.
Asset management of Smart Telecom faces delays; Ncell's ‘influe...
A cabinet meeting held last month decided to carry forward the asset management of seven public entities including Gorakhkali Rubber Udyog, Udayapur Cement Udyog and Hetauda Cement Factory. Likewise, the budget for the fiscal year 2025/26 also backs the decision of the cabinet meeting.
Last March, parliament passed the "Privatization Bill (First Amendment) Ordinance 2081 BS. This also paves the way for the government to move ahead with the privatization of ailing enterprises. The revised act has permitted the government to float shares in public, to go into merger or to liquidate the fixed assets of the crisis-ridden PEs depending on the situation.
After facing criticism for the privatization of PEs in the amended law, the government remodeled its action stating it as asset management. According to the MoF, the government has moved forward in this line for the valuation of four enterprises in the first stage.
Janakpur Cigarette Factory has remained shut for the past 14 years. As of FY 2022/23, the factory was in cumulative loss of Rs 2.92 billion. Nepal Orind and Magnesite Company has a cumulative loss of Rs 5.03 billion, while the enterprise owes Rs 2.40 billion to the government.
Similarly, Butwal Yarn Factory has remained closed for the past one and a half decade and its cumulative loss stands at over Rs 2 billion. Although Nepal Metal Company has its net assets of Rs 178.30 million, the enterprise is left to clear government loans of Rs 920 million.
The first privatization of PEs was started after Nepal adopted a liberalization policy in early 1990s. However, the move has been heavily criticized on the ground that it could not best serve the objectives of the market competition and open economy system.
The White Paper on Economy unveiled by the then Finance Minister Yubaraj Khatiwada in 2018 had also mentioned that the privatisation drive carried out by the government in the past had essentially failed. Khatiwada had stated that privatised enterprises were neither guided by the objectives of privatisation nor did they add value to services, products and jobs, resulting in the state to incur heavy losses. “The government had almost nothing in return from the public enterprises that were handed to the private sector,” Khatiwada had said.
