Government panel recommends divestment of seven state-owned institutions

A government panel has suggested the government to sell seven state-run loss making institutions.
The panel — formed to ‘Review Government Budget Management and Spending System' — presenting a final draft of its recommendation suggested the government to divest its shares from Hetauda Cement Factory, Janakpur Cigeratte Factory, Udayapur Cement Factory, Nepal Aushadhi Ltd, Grameen Awash Company, Nepal Awas Bikas Bitta Company and Nepal Bank Ltd.
The state-owned institutions are operating under losses due to leakage, financial indispline, and lack of professional management due to confusion over their goal on whether they are commercial or social entities, the report added.
The first commercial bank is also suggested to divest. Despite being the oldest and one of the largest banks, it is still under the control of central bank.
Similarly, once the profit making Hetauda Cement Factory, Udayapur Cement Factory and Janakpur Cigeratte Factory — that is currently at a loss of over Rs 530 million including Rs 500 million overdrafts and Rs 30 million interests — are also suggested for divestment as their financial health is deteriorating.
Finance Ministry has tried to revive the Nepal Aushadhi Ltd (NAL). However, the sale of medicines produced by NAL continuously dropped and plunged by more than 60 per cent in the past four years. Its annual turnover dropped to Rs 20.6 million during fiscal year 2008-09 from Rs 50.3 million recorded in 2005-06. It has overall liability of Rs 270 million to different financial institutions.
Earlier, the government has divested some of its shares of Nepal Telecomm (NT) and floated to the public turning it into a public company. It is listed at Nepse currently.
The panel has suggested four alternatives — reform and operate as government entity or reform and operate under public, private partnership (PPP), divestment, send to liquidation, and merge and operate under PPP. The government has been incurring heavy losses running these loss-making entities despite their under performance.
It has also suggested to liquidate five state-owned companies — Nepal Orind Magnesite Pvt Ltd, National Trading Ltd, Timber Corporation of Nepal, National Construction Company Nepal and Nepal Engineering Consultancy Centre.
However, the panel has recommended the government to operate Nepal Food Corporation, Civil Aviation Authority of Nepal, Gorkhpatra Corporation, Nepal Television, Nepal Electricity Authority and Nepal Water Supply Corporation (NWSC) — after reforms.
Under reforms it has suggested policy reforms, structural reform, management reform, financial reform and reforms in divestment also.


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