Public Enterprises in Nepal

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Background

  • Public Enterprises (PEs) had been established in Nepal to provide essential good and service related to the daily life of all citizens at an affordable price as well as easy access to them, create employment opportunities, build up the foundation of physical infrastructure for development, develop the self-reliant economy, assist to import substitution and establish welfare state to promote social justice.
  • Government of Nepal (GoN) has been establishing and managing PEs in public service, industry, trade, financial, industrial sector, and the like. (MoF,2020)
  • The establishment of PEs was started from the first five-year periodic plan and the establishment of Biratnagar Jute Mill in 1993 B.S. marks the beginning of the establishment of a public enterprise in Nepal and their number had reached 62 by the end of the Seventh Plan (2042- 2047BS)
  • The existing number of PEs is 44 as of February 2020; the number of Public Enterprises fully and partially owned by the Government of Nepal is 44. There are 10 industrial PEs, 10 service sector PEs, 5 business sector PEs, 5 social sector PEs, 5 public utilities PEs and 9 financial sectors PEs. Only 33 public enterprises are in operation while 5 public enterprises are not in operation (Economic Survey 2076/77)
  • In the Fiscal Year 2076/77 BS, Nepal Food Corporation and National Trading Limited merged and Food Management and Trading Company Limited have been established. Similarly, Nepal Forest Corporation Limited has been established by merging the Agricultural Ingredients Company of Nepal and Forest Product Development Committee. Dhauwadi Iron Company Limited and Nepal Infrastructure Construction Company Limited has been established in the fiscal year 2076/77 BS.
  • 30 corporations have been privatized so far as per the policy of disinvestment of government investment in public enterprises after the government adopted a liberalized market economy.

Formation and Management

  • There is no uniform legal system regarding the formation and management of public enterprises in Nepal. Therefore, PEs in Nepal has been formed by various acts.
  • Among currently existing 44 public enterprises, 33 have been established under the Companies Act, 7 under the Special Act, 2 under the Communications Act, 1 under the Cooperatives Act, and 1 under the Corporation Act.
  • There are also variations in the operating process and procedures of PEs. Not even uniformity is found in their bylaws and regulations implemented for conducting daily and managerial functioning of some PEs having similar nature.
  • The decision of the Public Service Commission following the Constitution of Nepal has been implemented for the filling of the recruitment of required manpower.
  • For the operation and management of the corporation, there are three levels of operation including General Assembly (GA), Board of Directors (BoD), and Management Team.
  • The existing institutions are being formed and managed under the jurisdiction of different 11 ministries.

Highlights of Operational Status of Public Enterprises

  • Total operating income, dividends provided to the government, taxes paid by public enterprises, and net profit figures show that public enterprises have been performing reformative work over the past few years.
  • The overall financial position of PEs has been positive in FY 2075/76.
  • In FY 2075/76, the net profit of the PEs increased by 12.36 percent as compared to the previous year and reached Rs. 48.77 billion.
  • In FY 2075/76, the accumulated profit is decreased by 3,38 % and accumulated losses decreased by 27.93 % and overall accumulated profit increased by 28.93 % and reached Rs. 51.66 billion.
  • Out of 44 enterprises operating till FY 2076/77, 26 PEs are in profit, 5 PEs have zero transaction and 13 PEs are in loss.
  • In FY 2075/76, the net profit of 26 corporations has increased by 17 % while the net loss of 13 corporations operating at a loss has increased to 306.58 %.  
  • The net worth of the shareholders in the Fiscal Year 2075/76 is increased by 21.01% as compared to the previous Fiscal Year.
  • Total investment has increased by 27.36 % as compared to the last fiscal year and reached Rs. 454.59 billion.
Growth of Operating Income of Public Enterprises in Nepal
Growth of Operating Income of Public Enterprises in Nepal

The overall growth rate of operating income of  public enterprise is shown below:

Fiscal YearThe growth rate of Operating Income (%)
207020.17
207115.48
20725.06
2073-12.91
207434
207521.6
207620.29
Highlights of Operational Status of Public Enterprises in Nepal/Source: MoF,2020

Ownership Structure of Public Enterprises in Nepal

  • The numbers of existing PEs are 44 till FY 2076/77 and out of which 31 public enterprises are wholly owned by the government and 21 enterprises are owned by the government with a majority of share (Majority refers to more than 50 percent of the investment).
  • All the public enterprises belonging to the social sector are fully government-owned.

Contribution of Operating Income of PEs to Gross Domestic Product of Nepal

  • The contribution of the operating income of public enterprises to the GDP has been increasing for the last five years. This contribution is highest from the PEs belonging to the business sector and the lowest from the social sector.
  • Looking at the statistics of the last five years, the average contribution of the business sector PEs to the GDP is 6.5 percent, and the contribution of the social sector PEs is 0.07 percent.
  • However, the average contribution of the total operating income of PEs to national GDP is accounted for 12.5 percent in the last five years.
Contribution of Operating Income of PEs to GDP of Nepal
Contribution of Operating Income of PEs to GDP of Nepal

Following table shows the trend of the contribution of operating income of PEs to the GDP of Nepal;

Fiscal YearContribution to GDP (%)
207013.17
207113.29
207212.96
207310.67
207412.05
207512.48
207613.6
Contribution of Operating Income of PEs to Gross Domestic Product of Nepal/Source: MoF,2020

Contribution to Income Tax Revenue of Nepal

  • The share of income tax received from public enterprises’ income in the total income tax has been increasing for the last five years.
  • Looking at the sector-wise statistics, the contribution of the financial sector is the highest and the contribution of the industrial sector is the lowest.
Contribution of PEs to Income Tax Revenue of Nepal
Contribution of PEs to Income Tax Revenue of Nepal

The following table shows the contribution of public enterprises to income tax;

Fiscal YearContribution in Income Tax(%)
20702.36
20711.86
20721.6
20731.62
20749.7
20758.6
20769.04
Contribution to Income Tax Revenue of Nepal/Source: MoF,2020

Contribution of PEs in Employment of Nepal

  • Out of the total workforce of 7.86 million in Nepal, 0.43 % is covered by the employment of public enterprises in the fiscal year 2075/76.
  • Public institutions in the public utility sector have provided the most employment (45.44 %) while those in the social sector have provided the least employment (4, 09 %) in FY 2075/77.
Contribution of PEs in Employment of Nepal
Contribution of PEs in Employment of Nepal

The trend of the contribution of public enterprises in the employment of Nepal is shown below;

Fiscal YearContribution in Employment (Number) 
207227862
207329008
207428405
207528522
207630769
Contribution of PEs in Employment of Nepal/Source: MoF,2020

Note: This article does not present any analytical aspects of Public Enterprises in Nepal. The content is entirely withdrawn from the website of the Ministry of Finance. The relevancy of Public Enterprises in Nepal or the evaluation of the Performance of PEs is not presented here.

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