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.

Govt likely to scrap agreement with Benchmark Ltd

The Benchmark Company Limited (BCL) is likely to lose the contract for developing the proposed 170km Kathmandu-Birgunj Electric Railway as it has failed to complete feasibility study and environmental impact assessment (EIA) on time.
The government had awarded the project to BCL in 2006 under the build-own-operate-transfer (BOOT) model.
"We might scrap the agreement with BCL as failed to complete feasibility study and EIA on time," said Dipendra Bahadur Kshetry, vice chairperson of the National Planning Commission (NPC). "But we will also consider the progress it has made on the project so far before scrapping the agreement.”
According to a highly placed official at the Ministry of Physical Planning, Works and Transport Management (MoPPWTM), the agreement between the government and BCL is expiring on Wednesday. "The company has not even estimated the cost of the project," Tulsi Prasad Sitaula, secretary at the ministry told Republica.
The company submitted its preliminary report on Tuesday to the ministry. "We have asked the company to estimate cost and benefits of the project," Sitaula said. "The government would move ahead only after the contractor company estimates the cost and benefit of the project."
However, the ministry is not authorized to scrap the agreement with the company. "The BOOT committee led by NPC Vice Chairperson Kshetry would take a decision in this regard," said Sitaula.
The government had awarded the project to the company under the BOOT model. “But this project is supposed to be developed under the public-private partnership (PPP) model," Sitaula said. "The project is an important one but the government is not clear whether or not to renew the agreement with the contractor company."
According to Sitaula, the company has tentatively estimated the cost of the project to be Rs 38 billion. "But this is not a well calculated figure," he said. "We have asked them to come up an exact estimate."
Earlier, the government had extended the deadline for the company to submit feasibility study and EIA report by four months. "I don´t see any point in further extending the deadline," the official said.

Enactment of IEA, SEZ law not possible: Minister Jha

The government on Thursday made clear that the enactment of new laws related with the private sector such as Industrial Enterprises Act (IEA) and Special Economic Zone (SEZ) Act was not possible anytime soon, as its priority for now was to put in place laws that would enable it to hold elections and end the long-running political deadlock.
"In the absence of parliament, we can enact laws only through ordinance. And the government´s priority at this juncture is definitely not the bills related to the private sector," said Industry Minister Anil Kumar Jha.
To a delegation of Confederation of Nepalese Industries (CNI) that met with him and requested for the enactment of long-pending bills related with the industrial sector, Jha said enactment of laws such as IEA and SEZ Act was not feasible at this juncture.
Newly elected CNI President Narendra Kumar Basnyat and his team members had reached Ministry of Industry (MoI) on the day to pay a courtesy call to Minister Jha, and in the course, urged the government to endorse at least laws such as IEA and SEZ to boost investment confidence and improve industrial environment.
"The industrial sector is reeling under problems such as acute power shortage and labor disputes," Basnyat said. "Additionally, we also don´t have policies that guard our investment and get some relief package from the government," he stated while requesting the Minister to take some initiatives to normalize the situation.
The CNI delegation had also expressed its disappointment with the minister over the government´s apathy to industries´ concerns such as poor industrial climate, rigid labor law and power crisis.
"We know that lack of parliament and the long-running political deadlock are major concerns, but we still request the government to put in place basic requisites for economic development," said Hari Bhakta Sharma, vice president of CNI.
Addressing the delegation, Minister Jha said that the government was seriously working to provide necessary support to the industrial sector. "Your demands such as subsidy on diesel consumed by industries and enactment of new acts are genuine. But the truth is we are not in a position to fulfill them," Jha said.
During the meeting, businessmen also asked for a separate power grid for the industrial clusters. "We also need subsidy on diesel so that we could optimally utilize our capacity and improve productions."
Businessmen, expressing their worries over labor problems, also asked Minister Jha to take some measures to control unethical behavior of the trade unionists in the manufacturing sector. "We are being intimidated by unreasonable activities of the trade unions affiliated to different political parties, including Madhesi parties," Basnyat said. "The entire production system has been disturbed due to labor unrest."
However, Minister Jha remained mum on the issue.

NEA team off to Delhi for additional power import

A team of officials from the Nepal Electricity Authority (NEA) left for India on Wednesday aiming to fix logistic requirements for the import of additional 55 MW electricity and harnessing the ties for mid and long term power trade between the two countries.
A three-member NEA team led by Rameshwore Yadav, managing director of NEA, left for India after the Indian government during President Dr Ram Baran Yadav´s visit last week expressed its commitment to export additional 55 MW electricity to Nepal for this dry season.
"We will request our Indian counterparts to speed up the process of fixing required infrastructure as soon as possible," Yadav said before leaving for India. Yadav has assured that the committed 55 MW electricity would be imported within the next four months.
According to Yadav, the team will also hold talks with Power Trade Corporation of India (PTC) and other Indian officials to fix transmission lines on the Indian side. Currently, Nepal imports total of 115 MW power from India.
"We can import upto 180 MW electricity from India through our existing transmission lines," Yadav said. "However, there are certain issues such as paperwork and repair of transmission lines on Indian side to be resolved by India."
The additional 55 MW power that is expected to be imported within the next few months as the Indian government has commited to export a total of 200 MW power to Nepal. "We have to construct additional transmission lines if we want to import more than 180MW electricity from India," Yadav said.
Meanwhile, the team will also focus on speeding up construction of Dhalkebar-Muzaffarpur (400 kV) transmission line. "We will hold discussions with the concerned Indian officials to give impetus to the project," Yadav said.
In November 2009, NEA and Indian stakeholders -- PTC, Infrastructure Leasing & Financial Services (IL&FS) and Power grid Corporation of India Ltd (PGCIL) -- had set May 2010 as the deadline for completion of the Power Purchase Agreement (PPA) and financial closure of the project. However, no substantial progress has been made towards completing the target so far.
"Our visit has two specific purposes," Yadav said. "One is to fix the short-term logistic requirements, second and more importantly, to streamline the talks with India towards long term power trade between the two countries."

Few successes, many failures

Infrastructure Development in 2012

It comes as no surprise that the government could not complete the road expansion in the Kathmandu Valley in the promised time. However, the fact is the expansion drive that kicked off in 2012 has widened more than 125 road sections and expanded around 200 km of roads, easing the lives of commuters.
Though the road expansion program was launched amid appreciations and criticisms from different quarters, nobody can deny that it has become a landmark achievement that Prime Minister Baburam Bhattarai can boast for years to come. In fact, many tag it as the only tangible achievement of the Bhattarai-led government.
The government had announced that the expansion drive would be completed by August 2012. But as the year ends, it is not even half way through.
Road sections where all works of expansion have been concluded include Kalimati-Balkhu (3 km), Dillibazar-Baluwatar (3.2 km), Bhatbhateni-Dhumbarahi (2 km) and Kuleshwore-Teku (2 km).
"Altogether more than 78 km of road expansion including small and long stretches has been completed," Krishna Hari Baskota, secretary at the Office of the Prime Minister and Council of Ministers (OPMCM) said.
"We will complete expansion of 100 km by coming April," Tulasi Prasad Sitaula, secretary at the Ministry of Physical Planning, Works and Transport Management (MoPPWTM) added.
The government has already widened 150 km of road in the valley. "The task of laying gravels in 100 km, out of the total widened road, is under way, and the process of blacktopping 50 km road is in progress," Baskota said.
The government has already spent Rs 1.5 billion in the road expansion so far and plans to spend additional Rs 5 billion.
"Similarly, as per a government estimate, private properties worth Rs 10 billion has been destroyed in the road expansion drive until now," Baskota added.
Similarly, the government has also announced plans to develop Bagmati and Bishnumati corridor aiming to ease the traffic in the Valley. "There are different constraints in developing the corridor such as obstructions from squatters and the compulsion to save natural resources," Baskota said.
Likewise, the government has also started to expand the road section in the Valley such as Vijaya Marg (3 km), Banasthali (1.5 km), Seto Pul (5 km) and Chabahil to Sundarijal (10 km).
Contrary to the success in expanding the Valley´s roads, the government failed miserably when it came to developing large-scale national-level infrastructure projects. "We couldn´t deliver substantial results in our national pride projects such as Kathmandu-Tarai Fast Track, Mid Hill Highway and North-South Highway," Sitaula said.
According to Sitaula, the track opening for the Fast Track project could not been completed due to high cost of land acquisition in some areas such as Khokana, Lalitpur. "The construction of North-South Highway and Mid Hill Highway did not take off due to different constraints," he added.
The government couldn´t introduce new projects in the current fiscal year due to lack of budget. "Even the ongoing projects are facing different problems," Sitaula said. "The donor funded infrastructure projects such as strategic road and bridge projects have been stalled due to lack of budget."
Hydroelectricity
Load shedding hours this winter might get longer than in the previous years, but endeavors made in 2012 were comparatively better towards accomplishing the long term goal of generating enough hydropower to meet the national demand.
The government granted licenses to 23 different power developers during 2012 who are engaged in small and medium sized hydropower projects that will generate a of total 924.6 MW hydropower within next few years.
Mega hydropower projects such as Arun III (900 MW), West Seti (750 MW), Upper Karnali (900 MW) and Upper Tamakoshi (600 MW) that were in standstill got some impetus in 2012.
However, officials at the Ministry of Energy (MoE) express mixed reactions about the achievements made during the year.
"We have been able to achieve quite a lot during the year in paper but the progress in the field is not that encouraging," Sriranjan Lacoul, joint secretary at the MoE said. "Lack of investment environment, local issues and lack of risk mitigation mechanism in our country, among others, are the reasons for this situation."
The government formed a new entity called Nepal Investment Board (NIB) and tasked it with the responsibility to lure foreign investments into the country. Last May the government handed over 14 mega projects including 5 mega hydropower projects to the board. In addition, the government has given NIB the authority to implement all hydropower projects above 500 MW.
According to Nepal Electricity Authority (NEA), total of 5013 KW power has been added in the national power grid in 2012. The small power projects which have been streamlined in the national power grid are Gayatri Hydropower (955 KW), Thansikhila (955 KW), Prime Hydropower (518 KW), Namobuddha Hydropower (900 KW), Mansarobar Hydropower (580 KW) and Universal Hydropower (480 KW), among others.

NEA to hold talks with Rahughat project developer

The Nepal Electricity Authority (NEA) has formed a high-level committee to hold dialogues with IVRCL Infrastructures & Projects Ltd, an Indian company that bagged the contract for developing Rahughat Hydroelectricity Project (32 MW), but has stalled works demanding upward revision of costs.
"We study the situation and hold dialogues with IVRCL," said Managing Director of NEA Rameshwore Yadav, who is heads the committee formed to hold talks with the Indian company. "We will also study whether such projects benefit NEA."
The four-member committee that will hold dialogues with IVRCL also has the mandate to decide whether or not to revise the cost of the project, according to NEA officials. “I can´t say anything now but we may have to make an upward revision of costs if we want project to complete," an official from NEA said on condition of anonymity.
NEA, which is developing Rahughat with soft loans from Exim Bank of India, is also mulling to stop developing small scale projects. "We are thinking not to handle projects with the capacity of less than 100 MW," Yadav said. "These kind of small projects only kill the time and resources of NEA."
IVRCL has halted the project works for a month demanding cost adjustment with increased prices. The project was awarded to IVRCL in November 2010 and was expected to complete in 42 months. “We think it too late now to make a cost adjustment," Yadav said.
According to NEA officials, the government had signed a contract agreement worth Rs 2.5 billion with IVRCL. "IVRCL is pressing us for cost readjustment two years after signing the contract agreement. This is not ideally acceptable," an official of the project said.
The locals have pushed for early completion of the run-of-the-river project is based in Myagdi -- a hilly district in mid-western part of the country. "This is completely an issue between NEA and contractor IVRCL," Dilip Poudel, Republica´s Baglung based reporter said over phone. "Locals want this project to be completed on time."

Bad business

ECONOMIC MEMOIR OF 2012

In a recent World Bank report, Nepal fell from 107th to 108th position in the ‘Doing Business Index’. Unsurprising, given that Foreign direct investment (FDI) commitment in the period declined substantially: the government’s ambitious plan of bringing in US$ 1 billion in FDI could not be accomplished, not by a long shot, nor could the Investment Year 2012/13 kick off on time. The International Monetary Fund (IMF) labeled Nepal’s private sector a weak player in national economy. Inflation continued on its upward tick, and so did hours of load shedding. Why did things go so badly wrong in 2012?
The country’s vital institutions fell far short of delivering the expected results. In their recently published book Why Nations Fail?, Daron Acemoglu and James Robinson argue that the prosperity of a country depends on the nature of its institutions and not the country’s historical, cultural or geographical background. Our weak institutions aren’t even able to carry out their regular work, let alone devise innovative ways to boost performance.

PHOTO: ARTMAGZIN.FILES.WORDPRESS.COM
The institutional failures were there for all to see. First of all, the Ministry of Agriculture Development (MoAD), assigned to ensure the availability of chemical fertilizers to farmers during plantation season, failed in its task, resulting in significant decline in paddy production. According to MoAD, paddy production is estimated to fall by 11.3 percent (to 4.5 tons) this year, inflicting a loss of Rs 12 billion on the national economy.
In another misguided move, the government decided to fix the maximum retail price (MRP) of some essential commodities, drawing widespread criticism from the private sector. The government’s move was supposed to provide some relief to consumers from galloping inflation. Unfortunately, the government’s immature decision ended up making people pay even more than they were paying before the price fix. This was owing to the failure of the Ministry of Commerce and Supplies (MoCS), entrusted to enforce laws and monitor the market, to ensure proper monitoring of prices in line with the government announced MRP.
Third, public enterprises like Nepal Electricity Authority (NEA) and Nepal Oil Corporation (NOC) continued to underperform due to red tape, unresponsive bureaucracy, and lack of political willingness to vital reforms.
Fourth, the vital sectors of the economy continued to perform poorly compared to previous years. The contribution of manufacturing to gross domestic product (GDP) fell to 6.2 percent, the lowest in a decade. The services sector, though still doing well in comparison, is also not performing up to the desired level. As a result, overall growth has declined to just 3.8 percent in the current fiscal year, and achieving double digit growth appears a distant dream.
Fifth, remittance, the economy’s only reliable lifeline, continues to increase gradually, but most of it is going into unproductive areas. The scenario of foreign employment is sadly worsening.
Sixth, the gap between import and export is ever increasing. We have always been inefficient in tapping the duty-free and quota-free facilities granted by countries such as China, the US and the European countries. The government has not been able to hold regular bilateral meetings with the US, which have been due for one and a half years.
Looking at the big picture, year 2012 started with a hope that the country would get a constitution, which would spell the end of the long transition. People were expecting a constitution that would lay the country’s economic foundation. Instead, there seems to be more turbulence ahead.
The private sector, for its part, is afflicted by political instability, power shortage and labor unrest. Over three dozen firms recently scaled down production by as much as 50 percent owing to energy shortage. Like the public sector, the private sector is extremely inefficient, politicized, corrupt and unresponsive. The main reason behind the privatization of public enterprises after 1990 was to make them more competitive and professional. Unfortunately, two decades later, the private sector still seems to be in wilderness. The private sector’s unnecessary lobbying and unethical activities have damaged the country’s trade with neighboring as well as faraway countries. The case of illegal re-exporting of goods such as beetle nuts and pulses, among others, came to light this year.
Political instability aside, the crucial question is: how can the private sector make itself effective even during transition? Most private sector players are still busy in dirty political games than in doing business. Their unholy engagement in politics has ultimately cost the national economy a lot.
Our private sector’s effectiveness is far below that of other South Asian countries, where private sector continues to perform well despite political instability. For instance, the private sector in Bangladesh, which has seen many more political upheavals than Nepal, has proved to be the country’s growth engine.
In short, though there has been progress in certain areas, the year 2012 was largely disappointing for businesses and national economy. As things stand, 2013 is shrouded in even more uncertainty. Let us hope our politicians can get their acts right in 2013 and work at getting the country on track to economic prosperity.