MoI outsources task of conducting audits of 30 firms

The government has outsourced the job of conducting due-diligence audits of around 30 firms waiting to be declared as ´sick industries´.
The Ministry of Industry (MoI) outsourced the task to four chartered accountants as it lacked expertise on evaluating financial status of those firms.
"Four chartered accountants from the Association of Chartered Accountants of Nepal (ACAN) are currently trying to identify the actual financial status of the firms that are waiting to be tagged as sick industries," Bishnu Dhakal, under secretary at the MoI, told Republca.
The MoI outsourced the job as a technical committee, formed to identify sick industries and recommend facilities for them, required complete financial details of those firms.
The technical committee, which has the ultimate authority to identify and recommend facilities for sick industries, is now working with the team of chartered accountants to chart out financial support required by the firms.
More than 30 firms filed applications at the MoI to get status of sick industries almost a year ago.
"The chartered accountants will conduct audits of those firms and prescribe financial support they require from the government for recovery." Dhakal said. "Additionally, they will also carry out study on what pushed them to the verge of collapse."
Earlier, the Council of Ministers had approved the terms of reference of the technical committee, providing it more teeth to finalize the task of identifying actual sick industries.
"The ministry will prepare a list of sick industries and support they need to rebuild themselves after carefully analyzing their financial status," Dhakal said.
The government had earlier announced to provide relief package to sick industries through its Immediate Relief Program 2011/12.
The MoI was assigned to identify actual number of sick industries after the Sick Industries Rehabilitation High Level Task Force prepared a report with recommendations to revive sick industries in 2011.

Govt speeds up process of reviving sick industries

Industrialists worried by worsening health condition of their firms can now take a sigh of relief as the government has granted authority to a technical committee to take decisions on providing support to sick industries - a measure aimed at speeding up the process of reviving the country´s moribund industrial sector.
The Council of Ministers this week approved terms of reference (ToR) prepared by a technical committee at the Ministry of Industry (MoI). This decision paves way for the technical committee to directly ask other concerned agencies to provide necessary support to industries identified as ´sick´.
"Finally, we have been authorized to make recommendations for revival of sick industries," Surya Kant Jha, under secretary at the ministry, told Republica.
The technical committee coordinated by Jha was formed a couple of months ago after the ministry was asked to carry out the task of studying actual situation of the industries, identify their problems and make recommendations on support they need.
"Earlier, we were in confusion about jurisdiction of our area of work," Jha said. To quell the confusion, the ministry then prepared a ToR and submitted it to the cabinet.
"As the ToR was approved, the committee is now able to directly ask other concerned agencies such as Nepal Rastra Bank, commercial banks and other government offices to make necessary arrangements to support the firms that need help," Jha explained.
As of now, the committee has recommended that three firms, namely, Shree Nepal Boarders, Birat Leather and Birat Shoes Ltd be declared as sick industries.
"After the government declares them as ´sick industries´ and publishes their names in a gazette, we can ask related bodies to restructure their bank loans, waive off interest or open exit door for them, among others," Jha said.
The government, last year, through immediate action plan-2011, had formed a high level task force under the leadership of Dipendra Bahadur Kshetry, vice chairperson of the National Planning Commission, to prepare a report on measures that need to be taken to revive and rehabilitate the country´s industrial sector. The report has proposed a slew of facilities to the sick industries.
However, all the recommendations made by the report may not be implemented as some of them are not in line with the existing Industrial Enterprises Act 1992.

Cabinet nod sought for sick industry revival package

The government has taken a step toward granting legal status to a report that recommended a slew of incentives such as loan restructuring and interest waiver to sick industrial units. The report was prepared over a year ago but remains unimplemented in the lack of cabinet´s approval.
The Ministry of Industry (MoI) has submitted the report prepared by Sick Industries Rehabilitation High-Level Task Force (SIR HLTF) -- a committee headed by National Planning Commission Vice-chairman Deependra Bahadur Kshetry -- to the cabinet on Thursday.
MoI, which was earlier entrusted with the responsibility to implement the recommendations of the report, has forwarded it to the cabinet for approval. The report has recommended various incentives and facilities to sick industrial units.
"The ministry has submitted the report to the cabinet on Thursday," a high level official at the MoI told Republica. "The ministry has so far been unable to provide any facilities recommended by the report since the cabinet has yet to endorse the report."
Previously, the Office of the Prime Minister and Council Ministers (OPMCM) had forwarded the report to the MoI for its effective implementation. The ministry formed a technical committee in order to identify sick industrial units. The committee that has the mandate to recommend the names of sick industrial units has recommended three firms, namely Shree Nepal Boarders, Birat Leather and Birat Shoes as sick industries, said the official, who requested anonymity.
According to the official, industrial units declared as sick are entitled to over a dozen facilities.
The report recommends financial incentives like, making arrangement for soft loans, restructuring of loans, providing additional loan from banks if needed, extending the loan repayment date, and incentives to rearrange the bad loans of sick industrial units.
However, the recommendations that are in the report are difficult for the MoI to implement. “Many things should be in place and functional to make this report effective,” said the official.

Govt to declare Shree Nepal Boarders, Birat Leather as sick industries

The government is set to declare Shree Nepal Boarders and Birat Leather as sick industries - a label which will pave way for the two to enjoy slew of incentives and special treatment from the state.
"A technical committee, formed to carry out required study prior to declaring any firm sick, has recommended labeling the two companies as sick," a high-level government official at the Ministry of Industry (MoI) told Republica.
This suggestion will soon be forwarded to the cabinet for final approval, according to the official. "Once the cabinet extends green signal, the firms will be entitled to special treatment from the government, which will provide impetus for their revival," added the official, preferring anonymity as he is not authorized to talk to media.
Of the two companies in line to be named sick, Shree Nepal Borders, a Bara-based firm, has accumulated loss of Rs 480.9 million as of fiscal year 2010/11.
To resurrect itself, the company has requested for more than a dozen incentives from the government, documents obtained by Republica show. These include easy access to loan, smooth power supply, availability of raw materials from Sagarnath Forest Development Project, three years of moratorium for loan payment and one year for interest payment, credit at six percent interest rate and availability of Rs 70 million in loans.
"The incentives and facilities will be provided as per the provisions in the Industrial Act 1992," the official said.
Birat Leather, another firm likely to be declared sick, also has its list of request, including permission to sell fixed assets.
The firm, established in 1981 under the name of Hetauda Leather Industry, then a state-owned enterprise, was renamed to Birat Leather after it was privatized in 1996. It has remained closed since June 2008 as per the court decision.
"The company has requested the government to grant it permission to sell its property to be able to pay back the loan," reads the document submitted to the MoI. "The company has also requested for loan restructuring."
The current initiative taken by the government to revive ´sick industries´ is based on a report prepared by a high level committee under the leadership of Dipendra Bahadur Kshetry, vice chairperson of the National Planning Commission.
However, the MoI, entrusted with the task of implementing recommendations of the report -- formally approved by the cabinet around a year ago -- has argued that the government can´t extend incentives outlined in the report as they are not in line with the existing Industrial Act.
"The companies will get certain facilities as per existing laws after declaring them sick," the MoI official said.

Govt revives 'sick-industries' talk

The government has once again called on industries to submit applications to get relief package under the Sick Industries Relief Program (SIRP). The annoucement was made at a time when the government is yet to process applications of 30 firms that have already applied to get the status of ´sick industry´.
"We have opened up the application process for industries to register themselves if they want relief package from the government under SIRP," Surya Kant Jha, under secretary at the Ministry of Industry (MoI), said.
The MoI which is entrusted to carry out the program to rehabilitate sick industries has formally issued the new notice aiming to receive applications from industries that want to be listed as ´sick´. "We have reissued the notice after we got some complaints that the industries which were actually sick couldn´t apply last time when government had called for applications," Jha said.
The government has again opened up the process of registering applications for industries which think they deserve to get relief package from the government´s program to revive sick industries. "The evaluation process of firms which have already applied will keep going," Jha said
However, the ministry responsible to finish the task of identifying actual sick industries has not been able complete cross verification of the information that the firms have submitted in almost one year period. "The ministry hasn´t finish assessing the applications of the firms which already have applied," Jha said. "However, we have completed field study of eight firms out of total 30 that have applied."
According to Jha, the industries which could get the government´s relief package can apply till the end of this month (November). "The firms have to demonstrate sufficient reasons why they became sick despite the well management of resources," Jha said.
The government through a recommendation report that was prepared last year under the leadership of Dipendra Bahadur Kshetry, vice-chairperson of National Planning Commission (NPC) has identified slew of relief measures for sick industries like tax waiver, extension of loan repayment date, loan restructuring and interest amount waiver among others.
Meanwhile, entrepreneurs who are seeking relief from the government to revive the situation of their industries have expressed low confidence due to unresponsive mechanism in the bureaucracy.
"It´s been more than a year that we have not got any response from the government on whether we fall under government´s criteria to get relief package or not, let alone getting anything tangible," an entrepreneur said in condition of anonymity since he has been looking for relief from the government.

Program to revive sick industries in jeopardy

The government´s ambitious plan to extend relief package to sick industries, as per the announcement made through the Immediate Relief Program 2011/12, is unlikely to see the light of the day because of red tape and dilly-dallying by concerned bodies.
The Ministry of Industry (MoI) was asked to identify and verify sick industries around a year ago. So far, 31 industries have applied to acquire the status of ´sick´ and relief package from the government. But the industry ministry has not even carried out field study of all industries to verify their status.
"We have completed field study of only eight firms out of 31 that applied for relief package," Surya Kant Jha, under secretary at the MoI, said. According to Jha, a technical committee that was formed in the ministry to conduct the study and cross-verify the information submitted by firms is preparing the report of these eight firms.
The MoI was instructed to identify sick industries following submission of a report by the Sick-Industries Rehabilitation High Level Task Force (SITHLTF), which had recommended revival of sick industries, back in 2011.
The task force´s report has identified a slew of relief measures for sick industries like tax waiver, extension of loan repayment date, loan restructuring and interest amount waiver, among others.
"More than a year has elapsed but we are yet to know whether our request for the relief package would be approved," an entrepreneur who has applied for the package said on condition of anonymity.
Like this entrepreneur, industrialists who have applied for the relief package are also in confusion. There are also those who have totally lost hope and deem the government will not walk the talk like in the past one decade when dozens of reports and recommendations to revive sick-industries were made.
The government had first incorporated a specific program to revive sick-industries in the budget for the fiscal year 1994/95.

MoI gets budget to cross-verify sick industries

After much fuss, the government has provided Rs 800,000 to the Ministry of Industry (MoI) to conduct a field study of industries that claimed themselves as being ´sick´ and filed applications for relief package.
The technical team that has been formed at the MoI to study the actual status of the industries and check the authenticity of the information provided by more than two dozens such industries will soon begin the field study of those industries.
“We have received a portion of budget that we sought for from the Ministry of Finance (MoF),” Anil Kumar Thakur, joint secretary at the MoI, told Republica. The MoI which is entrusted to carry out the ´relief program to sick industries´ had requested Rs 2.6 million from the MoF to conduct the field study of the self-declared sick industries.
According to Thakur, around 30 firms have applied at the ministry to get relief package that the government is set to provide after identifying their status.
The MoF had expressed reluctance to allocate budget to the MoI referring to the existing one-third budget and constrains it faced in providing budget to new programs. But it released the budget after Finance Minister Barsha Man Pun through ministerial decision instructed the budget division to release the funds, considering the importance of the MoI´s program.
The government had been promising relief package to the sick industries since 2011/12, but the program has not yet been implemented due to a lack of clear definition and parameters to judge the genuine sick industries.
Last year, the government prepared an extensive report suggesting different types of relief packages to the sick industries to revive them. The MoI is presently working to finalizing the list of actual sick industries.

Don't put assets of sick industries under the hammer, NRB told

In a bid to protect sick industries, the government has requested Nepal Rastra Bank (NRB) to not allow commercial banks to auction off assets and collaterals pledged by them.

According to a high-level official at the Ministry of Industry (MoI), the ministry sent a letter to this connection to the central bank a couple of days ago. In the letter, the ministry has requested NRB to not let commercial banks auction off assets of sick industries until the government implement special packages promised to them.

“We are in the process of identifying sick industries,” the official said, adding, “We have requested NRB to stop auctioning off of their property as per the request of those industries.”

The official said the ministry sent a letter to the central bank following strong pressure from some industrialists. He, however, refused to disclose the name of the industrialists.

The industry ministry, which is entrusted to implement programs to revive sick industries, has formed a technical committee to study and finalize the actual number of sick industries in the country.

“The technical committee issued a public notice last week, asking all the industries to register if they term themselves ´sick´,” the official told Republica.

The industries have to register their names by the end of this month. The committee will then study the actual situation of those industries. 

According to the official, the ministry formed sick industries unit and the technical committee after the cabinet approved the report of the high-level task force that was formed to revive and rehabilitate sick-industries about seven months back. 

Meanwhile, the ministry has requested Rs 2.6 million from the finance ministry for the technical committee. 

The government has announced slew of relief measures for sick industries like tax waiver, extension of bank loan repayment date, bank loan restructuring and interest amount waiver among others. Industrialists have been pressing the government for early implementation of relief measures.

“We hope banks won´t auction off assets of any industry until we finalize the list of sick industries and publish their names in the gazette,” the official said.

Separate unit formed to provide relief to sick industries

The Ministry of Industries (MoI) has set up a new unit to implement recommendations made by a high-level taskforce formed to recommend measures to give a new lease of life to sick industries.

According to a ministry official, the unit was formed after the cabinet approved the report of the high-level taskforce formed by the government about six months ago. The taskforce was led by Dipendra Bahadur Kshetry, vice-chairman of National Planning Commission (NPC).

“The unit will focus on implementation of recommendations made by the taskforce,” the official said preferring anonymity.

The taskforce has recommended host of relief packages such as bank loan restructuring, extension of the bank loan payment date, waiver of interest among and tax, among others.

The government, however, has yet to name the industry eligible for the relief package.

“The unit will also come up with a certain criteria to identify sick industries,” the official said.

Approving the report of the taskforce, the cabinet had delegated the authority to identify sick industries to a committee at the MoI.

Distribution of relief packages will begin after publishing the names of sick industries in Nepal Gazette, the official said.

The taskforce, in its report, has named 26 firms in the list of sick industries.

“The technical committee under the MoI will study whether or not those firms meet the criteria of sick industries,” Anil Kumar Thakur, joint secretary at the MoI said.
This means sick industries will not get any relief from the government in this fiscal year as well.

The government had first incorporated a specific program to revive sick industries in the budget for fiscal year 1994/95.

Inability to define 'Sick industry' delays relief packages

Relief to sick industries, a program touted by the government since almost two-decade ago, is likely to go unimplemented this year as well, as a Technical Committee formed at Ministry of Industry (MoI) to define ´sick industry´ and chalk out criteria for distribution of relief package has diverted away from its core responsibility.

Over these years, multiple governments have consistently floated numerous offers like tax waiver, loans structuring and soft loans targeting the sick industries. However, those have remained unimplemented mainly because neither MoI, which is supposed to implement the package, or other related agencies know exactly what the sick industries actually are.

“For any relief package to be implemented, foremost thing we need is a clear definition, criteria and types of sick industries,” said a MoI official. "However, as various task forces did not clearly say which and what sort of industries can be termed as sick industries, the Prime Minister´s Office had asked the MoI to form a technical committee to work out the definition to pave the way for the implementation of relief measures."

Though MoI formed the technical committee more than a month ago, it has shied away from carrying out the assigned task, saying it has no clear authority to define and set criteria for sick industries.

“It is true the PMO issued us instruction. But the basic document -- report of Sick-Industries Rehabilitation High-Level Task Force (SIRHLTF) formed in 2011 -- on which the the instruction was based has no legality in itself. It is neither owned by the cabinet nor the cabinet issued us the instruction to define the sick industries,” said Anil Kumar Thakur, joint secretary of the MoI, who is also leader of the technical committee.

Sources at MoI, on the other hand disagreed with Thakur´s approach. “As the ministry formed the team on PMO´s instruction, he should first complete the assigned task and forward the definition and criteria to the cabinet for approval,” said a source.

If Thakur had acted in the way sources thought right, it would have paved way for an early implementation of the relief package. However, Thakur told Republica he was forwarding the SIRHLTF report to the cabinet to gain legality of the ministry-formed committee and carry out tasks assigned by the PMO.

Such dilly-dallying on the issue, meanwhile, has irked a committee formed by the government to monitor and carry out the follow up actions to ensure that the report made by the SIRHLTF is implemented.

“It is already six months since the PM instructed for the implementation of the report. Sadly, MoI is dragging feet for no good reason,” said Deependra Bahadur Kshetry, vice chairman of National Planning Commission and coordinator of the monitoring team.

Expressing his dissatisfaction over MoI´s slackness, he said the committee would soon seek explanations from MoI, PMO, Nepal Rastra Bank and Ministry of Finance for the lack of implementation of the report.

Kshetry also lambasted Thakur for his stance that the report should be endorsed by the cabinet for implementation. “It was endorsed by the prime minister and the PMO and instructed the MoI to implement it six months ago. I wonder what he is trying to prove by again forwarding the document to the cabinet,” he said .

MoI for implementing sick industries revival measures

Ministry of Industry (MoI), which was instructed two months ago to implement recommendations of a high-level taskforce to revive sick industries, is soon forwarding the stimulation package that the taskforce proposed to the cabinet to get formal authority from the government to implement it.
The ministry is seeking a formal nod from the cabinet to implement the taskforce´s suggestions as it has recommended the government to provide facilities like soft loans, waiver of tax and outstanding loans, something which the ministry has no authority to execute.
And as the Prime Minister´s Office (PMO) instruction to implement the report´s suggestions had come through verbal order, it had lacked legal status and thus, prevented the ministry from taking concrete steps to implement them.
“We are soon forwarding the report, including its suggestions, to the cabinet to get it owned by the government and secure legality to implement it,” Uma Kant Jha, secretary of the MoI told Republica.
The high-level task force on rehabilitation of sick industries, comprising eight members from different stakeholder institutions like National Planning Commission (NPC), Ministry of Finance (MoF) and Nepal Rastra Bank (NRB) had handed over its suggestions to the PMO in September, 2011.
The PMO had instantly endorsed the report and later forwarded it to MoI for implementation.
“We have the verbal instruction to implement it from PMO. But still we will need formal approval from the Cabinet to implement its recommendations,” Jha said.
He disclosed that the ministry has already formed a committee and is working out modalities to implement the report. “We are forwarding the modalities of report implementation to the cabinet as well so that we could get government´s consent on it,” Jha stated.
The ministry feels such a consent is very necessary as the implementation of the report requires better coordination between numerous stakeholders, including banks and other institutions and also various ministries.
Clearly, without the cabinet´s nod, the ministry cannot approach MoF to waive off taxes or request NRB to facilitate loans restructuring or arrange other facilities for the sick industries, as suggested by the taskforce.
“The approval of the cabinet, hence, is crucial for us to communicate with other stakeholders to get the sick industry revival measures implemented,” said Jha. Once the cabinet´s nod comes, he said the ministry would instantly start functioning as coordinating agency on behalf of the sick industries for the execution of revival packages.
However, knowledgeable officials said that implementation of sick industry revival measures will not be as easy because the report that pushed numerous recommendations has not categorically defined or categorized the sick industries.
“What this means is; we still have no criteria to genuinely identify which industry is sick, and what sort of facilities it is entitled to. Without it, the ministry simply cannot make its offer,” said a source.
The high-level taskforce during its study received applications from 26 firms claiming that they are sick industries. “However, we have not taken any decision on whether they are really sick industries,” Jha said.

Still waiting for relief

Twenty-six sick industries that were expecting relief package from the government, particularly after the Prime Minister instructed Ministry of Industry (MoI) last week to announce the package, are going to be disappointed again.

Instead of coordinating with the concerned ministries that were involved in working out the relief package, the MoI has decided to implement the ´incentives´ only after incorporating a provision of ´sick industry´ in the new Industrial Enterprises Act (IEA) that it is drafting.

MoI officials say the ministry cannot implement the package, which includes slew of incentives like taxi waiver, loans restructuring and other procedural facilities for sick industries on its own.

“We will need to incorporate a provision of sick industries in upcoming act before implementing it,” Umakant Jha, secretary of MoI, said, indicating that the package will not be implemented anytime soon.

Jha said the ministry was preparing to get rid of legal hurdles so as to implement the package as directed by the Prime Minister´s Office.

An eight-member taskforce comprising representatives from different stakeholders, including National Planning Commission (NPC), Ministry of Finance (MoF) and Nepal Rastra Bank - had prepared and submitted a report on sick industries to the Ministry of Industry a couple of months ago.

The report has labeled 26 industries, including Maruti Cement in Dharan, Bhrikuti Pulp and Paper in Nawalparasi, Basulinga Sugar and General Industry in Kailali and Shree Tiger Tops in Chitwan as sick units.

The ministry, which is supposed to be coordinating with all the line agencies to provide relief to the sick industries as envisioned in the report, is preparing to form different committees and technical teams for implementing the report prepared by the team led by Dipendra Bahadur Kshetry, vice-chairperson of the NPC.

"We will first incorporate the provisions for sick industries in the upcoming act," Anil Kumar Thakur, joint-secretary of the ministry and chief of the Industrial Promotion Division at the ministry, said.

“We are also in the process of forming a high-level team of legal experts to eliminate legal hurdles for implementing the report.”

Thakur said the ministry will expedite the process of providing incentives to the industries only after the draft of the act is endorsed. The new act will replace the existing Industrial Enterprises Act 1992.