Public entities turn into cash-guzzling machines

The government's inefficiency and indecisiveness have been burning a hole in the common man's pocket as public enterprises (PEs) have turned into cash-guzzling machines sans productivity.

The government has been regularly paying millions as salary to the staff, though the public enterprises have been literally closed, which is a gross waste of the tax paid by the public from their hard earned money.

"Janakpur Cigarette Factory that has been completely closed for the last two years has asked for Rs 56.6 million to pay salaries to 407 staff members," said a high ranking official at the Finance Ministry that has been under pressure to pay regular salaries and operating expenses of various closed and semi-closed public enterprises as the government does not dare pay off staff and is adding liability every year.

"They are like black holes, where the ministry has to feed cash ever year as it fears paying off staff also due to lack of resources," he said. 

The problem for the ministry to pay off staff is also due to the strong trade unions — apart from resource constraints — that are dominant and have policy influence due to their affiliation to political parties, he said, adding that PEs, including those which have been turned into companies with limited liability to the government, have been financially bankrupt due to regular political bickering and government's policy confusion.

The government has already lent a total of Rs 141.90 million to PEs in the current fiscal year.

The government has lent Rs 1.5 million to Nepal Metal; Nepal Oriend Magnesite and National Productivity and Economic Development Centre have both Rs 3 million each; the semi-operational Nepal Drugs — which has only been manufacturing glycerin and saline water — has been lent Rs 25.3 million; the completely closed Janakpur Cigarette Factory Rs 56.6 million; and Gorakhkali Rubber Industry has been already lent Rs 52.5 million for salary and operating cash, according to the ministry.

But the budget for the current fiscal year had alloted only Rs 5.3 million under the PEs reform programme. "They have been lent from other heads, transferring the budget as there is no alternative to pay them," the official added.

The Finance Ministry recently formed a committee to take stock of all the PEs and to advise on their future course. "The government should not run industries and let the private sector operate them," he said, adding that the government should only play the role of a regulator and facilitator.

Earlier, the Baburam Bhattarai-led government, on October 4, 2012, had decided to reopen at least three PEs — Birgunj Sugar Mill, Agriculture Tools Factory and Butwal Dhago Udhyog — which has again increased policy confusion and added a financial burden to the government coffer.

According to the ministry, though the number of employees in PEs has gone down, average expenditure on them has gone up despite poor performance and no productivity.