PEs continue to perform poorly, post Rs 3.49 billion net loss

The government has been failing to effectively operate public entities, as the number of loss making Public Enterprises (PEs) has been increasing every year – adding eight more in 2011-12 compared to 2010-11 – along with plunging productivity.

Likewise, Public Enterprises (PEs) government investment on them has also seen remarkable increase every year.

Of the total 37 PEs, only 15 PEs recorded net profit, while 21 PEs – as Nepal Engineering Consultancy Service Centre Ltd did not record any transaction – have posted a net loss of Rs 3.49 billion in the fiscal year 2011-12 as eight more PEs went into red compared to a year ago, according to the annual report of the PEs published by the Finance Ministry here today. “The PEs had posted a net profit of Rs 6.58 billion in the fiscal year 2010-11.”
Similarly, government’s debt on these public entities stood around Rs 101.23 billion. The government had invested Rs 102.41 billion in shares and Rs 101.23 billion in loan in the PEs by the end of the fiscal year 2011-12.
Until the fiscal year 2010-11, the investment in shares and loan stood at Rs 92.19 billion and Rs 95.16 billion, respectively.
Nepal Oil Corporation (NOC), Janakpur Cigarette Factory, Nepal Oriend Magnetite and Nepal Drugs contributed to the huge loss in the public entities.
The state oil monopoly Nepal Oil Corporation (NOC) had a negative shareholders fund by Rs 9.47 billion, alone. Due to huge loss of NOC trading sector – one of the six sectors among the 37 PEs – have recorded loss.

Sectorwise, three – service, social and financial sector PEs – have posted profits, while the remaining three sectors – trading, industrial and public utility sectors – have posted loss.

However, the public sector companies have posted an operating profit of Rs 185.79 billion – an increase by 22.3 per cent – in the fiscal year 2011-12

Of the total PES, only two – Nepal Telecom and Rastriya Banijya Bank – paid return to the government. They paid Rs 6.26 billion – some 6.1 per cent of the total government investment in PEs – dividend compared to a 2.56 per cent a fiscal year ago, the report added. In the fiscal year 2010-11, the government had received Rs 5.49 billion dividends from the PEs.

The PEs’ operating income has contributed 12.1 per cent to Rs 185.79 billion to the GDP, said finance minister Shankar Prasad Koirala, releasing the PEs annual report here today. “Of the six sectors, social sector PEs has less contribution at 0.08 per cent to GDP, while trading sector has the highest contribution of 6.21 per cent to the GDP,” he said, adding that the reports has also pointed out the need to long term reform of the PEs with annual targets for each company according to their objectives and work. “If they are not reformed on time, it will be a huge burden on the government.”

Chronic disputes in PEs need to be resolved with the help of tripartite committee of concerned ministry, management and employees, he added.

Regular political bickering and increased unionisation have eroded the competitiveness of the PEs, the report said, suggesting that the Public Enterprises Direction Board should work effectively to boost competitiveness and professionalism of the PEs.
Of the total 37 PEs, only 21 has completed their auditing, while rest of the them have yet to complete their audit,” Koirala, said, suggesting to take action action against the PEs failing to complete audit. "Rastriya Beema Sansthan, Udayapur Cement and Oriend Magnesite have not completed their audit since last eight years."

Profitering PEs
 Nepal Telecom – Rs 10.89 billion

Civil Aviation Authority of Nepal – Rs 2.14 billion
Rastriya Beema Sansthan – Rs 1.19 billion
Rastriya Banijya Bank – Rs 1.13 billion
Citizen Investment Trust – Rs 694.60 million

(Source: Finance Ministry)

Loss-making PEs
Nepal Electricity Authority – Rs 4.78 billion
Nepal Oil Corporation – Rs 2.62 billion
Udayapur Cement – Rs 250.70 million
Nepal Television – Rs 116.90 million
Nepal Orient Magnetite – Rs 48.60 million
(Source: Finance Ministry)

Challenges of PEs

·        Excessive employees but shortage of skilled manpower

·        Trend of appointing temporary employees and/or on contract basis

·        Rising administrative costs that increased by 13.87 per cent to Rs 32.94 billion in the fiscal year 2011-12 from Rs 28.93 billion a fiscal year ago

·        Financial and managerial aspects of PEs weak

·        Trade unionisation and political bickering

·        Lack of latest technology and infrastructure

·        Pension liabilities have been increasing

(Source: Finance Ministry)