Industrial Promotion Division facing budget crunch

The Industrial Promotion Division at the Ministry of Industry (MoI), which is entrusted to look after the entire industrial sector, has been reeling under severe fund crunch.
The government had allocated just Rs 4.2 million for the division in fiscal year 2011/12.
“That´s a very meager allocation,” a high-level official at the industry ministry told Republica.
The division, which is working to breathe a new life into sick industrial units, received just Rs 884,000 in the partial budget for 2012/13. “The division even couldn´t spend meager allocation of Rs 4.2 million in 2011/12. It spent just Rs 2.6 million - 63 percent of the total allocation during the year,” Bishnu Dhakal, under secretary at the MoI, said.
The division, which is working to finalize the draft of Industrial Enterprises Act (IEA), developing an action-plan to effectively implement Industrial Policy 2010 and preparing the draft of Technology Development Fund Regulation, does not have institutional capacity to perform these tasks.
“Leave alone developing infrastructures and facilitating industries, we don´t have budget for even small activities like carrying out study and holding consultation meetings,” said Dhakal.
The government´s indifference to the industrial sector is reflected in the country´s industrial growth. Growth rate of country´s manufacturing sector has been declining since 2002/03.
The division even doesn´t have budget to conduct technical study to finalize the list of sick industries. “We have sought the assistance of the finance ministry to conduct technical study,” Dhakal said, adding, “We have yet to hear from the ministry.”
Meanwhile, foreign ministry officials claim that the division is so incapacitated that it has failed to design new programs.

Industrial infrastructure program in limbo

When the government announced infrastructural support to cement factories utilizing local raw materials in 2008/09, the program had drawn praises from the private sector. Four years down the line, the priority program has completely lost steam. “

"This is sad. The program meant a lot to the private sector," said Pashupati Murarka, vice president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI). 

Under the program, the government had promised to construct roads, drinking water facility and lay electricity lines to the factory sites. This, the government had claimed would encourage investors to make use of country´s huge limestone reserves, thereby saving billions of rupees spent on imports of clinker.

The private sector had welcomed the government´s announcement because the program had committed to relieve investors of the need for spending huge money in constructing basic infrastructures. 

However, the government over the last four years has constructed only one third of the total 32 km road it had promised to the four cement factories -- Ghorahi, Sonapur, Dang and Rolpa. Though the government had released Rs 175 million for road construction, only 48 percent of the amount has been spent so far. “

"The progress in laying electricity lines and setting up drinking water facili”y," Bishnu Prasad Dhakal, under secretary at the Ministry of Industry told Republica.

Promoters of the cement factories accuse MoI for the poor implementation of the program. MoI officials, on the other hand, passed the buck on other ministries. 

"It is true that MoI is the executing authority, but we rely on Ministry of Physical Planning and Works for the construction of roads, Ministry of Energy (MoE) for laying electricity lines and Ministry of Local Development (MoLD) for installing drinking water facility," said Yam Kumari Khatiwada, joint secretary at MoI.

Top MoI officials claimed they have always been exerting pressure on the ministries to implement the progra“. "Sadly, they have never given the program a priority," stated an MoI official.

However, top officials at MoPPWTM have their own explanations. "It´s not that this program is not in our priority," said Tulsi Prasad Sitaula, secretary at MoPPWT. "But how can we achieve results without any prior consultation and proper homework?"

Industrialists, meanwhile, expressed disappointment at the lack of progress in implementation of the program.

"If there is lack of coordination between the ministries, it is up to the government to sort them o”t," said a promoter of a cement factory.

Committees and reports unable to revive sick industries

The government formed around a dozen committees in last 10 years to study and revive sick-industries in the country. All of them recommended ways to revive them but none could precisely categorize which were sick-industries.
As a result, there has been no change in the situation of sick industries since 1994 when the first committee was formed.
Recently the government formed 8-member Sick-Industries Rehabilitation High-Level Task Force (SIRHLTF) under the leadership of Dipendra Bahadur Kshetry, vice-chairman of the National Planning Commission (NPC) to categorize sick-industries, their problems and find solutions. However, the 20-pages report does not clarify on definition of sick-industries.
"It has already been six months since the report was finalized," a ministry official said on condition of anonymity "Report says what facilities to give to the sick industries but does not say precisely which are the sick industries and that is the main reason for not getting anywhere."
“Six industries have applied for immediate relief at the Ministry of Industry,” the official said. “But we can´t proceed since there is no legal categorization of the sick-industries.”
SIRHLTF paves the way for sick industries to multiple facilities such as postponement of bank loan repayment, restructuring of loan, waiver of tax.
In the annex, the report has listed 26 companies that applied to be categorized as sick-industries . "These are the industries that applied for benefits that we have set for sick-industries," Kshetry said, "But, we are yet to make a technical committee which will fix criteria for sick-industries."
Contrary to the Keshtry´s claim, Umakant Jha, secretary of the MoI, said the ministry was preparing to submit the report to the cabinet for approval. The MoI has reserved the process of implementation saying that it doesn´t have any legal ground to execute them without cabinet´s approval.
Previously, a similar high level committee was formed in 2010 under the leadership of secretary of the MoI. The report however, was replaced by a new one of SIRHLTF. “But there is not much difference between two reports,” said a source at the MoI.
According to Anil Kumar Thakur, joint secretary of the MoI, preparations were ongoing to incorporate definition of sick-industries in the Industrial Enterprises Act (IEA) which is in final stages.

SEZ bill through ordinance: Minister Jha

Minister for Industry Anil Kumar Jha on Monday said the government will enact the Special Economic Zone (SEZ) bill through ordinance before the upcoming session of parliament to address investors´ concerns and promote industries.
“I have already discussed the possibility of enacting SEZ bill through ordinance before the next session of parliament with the prime minister,” said Jha.
Speaking at a program organized to discuss on draft Industrial Enterprise Act (IEA), Jha said the government was prepared to enact the law through ordinance as opposition from a faction of UCPN Maoist forced him to withdraw the bill from regular agenda during the last session of the parliament.
“SEZ bill was the top agenda of the first parliament meeting of last session. But we had to withdraw it after Chief Whip of Maoist Dev Gurung warned his party would protest it strongly and even disrupt proceeding if the bill was added in the official business list of the house,” said Jha.
Jha said the government was holding talks with major political parties to put in place SEZ Act through ordinance. “I am also planning to approach President Ram Baran Yadav in this regard.”
SEZ bill was tabled in the parliament three years ago. Initially, labor unions protested saying it does not protect labor rights. But after trade unions softened their stance, resistance from a faction of Maoist emerged.
Gurung said the bill was against the national interest and would exploit natural resources and labor rights.
Industrialists, meanwhile, requested the government to implement the IEA through ordinance. “As the next session of parliament will begin only after few months, chances of IEA being ratified do not appear anytime soon. It might also face similar dilly dallying,” said Lawmaker and President of Confederation Nepalese Industries Binod Chaudhari said.
He also urged the government to provide all the facilities promised in the new Industrial Policy through upcoming budget for fiscal year 2012/13.
Commenting on the draft IEA which Ministry of Industry circulated for wider consultation, industrialists urged the government to list major manufacturing industries in the Act itself so there were confusion over facilities and incentives they should get.
“The draft should also incorporate a provision for forming Investment Promotion Trust and Technology Development Fund, which are incorporated in the Industrial Policy,” said Hari Bhakta Sharma, vice president of CNI.
In addition to that, entrepreneurs also demanded the government to clearly define small, medium and large scale industries and make the provisions of incentives more specific for them.