Capacity utilisation of manufacturing units down 14 percent

KATHMANDU, June 20: Average capacity utilisation of manufacturing units fell by around 14 per cent in the first half of the current fiscal year, as power shortage, infrastructural bottlenecks and transport syndicates continued to put a dent on production capacity of various industries, Nepal Rastra Bank (NRB)’s latest report says.

Average capacity utilisation rate of manufacturing companies in the country stood at 49.87 per cent in the first half of the current fiscal, as against 44.72 per cent in the same period last fiscal.

Although year-on-year comparison shows improvement in the performance of manufacturing units, the figure of the first six months is lower than average capacity utilisation rate of 57.83 per cent recorded at the end of the last fiscal. Submit

“The fall was largely triggered by energy crisis, syndicates prevalent in the transport sector, and infrastructure bottlenecks. These problems need to be dealt with immediately to enhance the competitiveness of industries,” says NRB’s latest Economic Activities Study Report, which was prepared by conducting surveys in and around Kathmandu Valley, Biratnagar, Janakpur, Birgunj, Pokhara, Siddharthanagar, Nepalgunj and Dhangadi.

The low capacity utilisation rate implies that most of the industries in the country are not making maximum use of their plants, thus, lowering production of goods.

The report shows that areas in and around Nepalgunj were home to most inefficient manufacturing units in the country, where average capacity utilisation rate stood at 28.80 per cent, shows the report. The most efficient manufacturing units, on the other hand, were located in and around Kathmandu Valley where capacity utilisation rate ticked 70.79 per cent.

These figures were derived after conducting surveys in manufacturing units that were producing 23 different types of goods ranging from cement, steel, bricks, pashmina, readymade garments, paper and soap to noodles, sugar, biscuits, processed tea, cooking oil, animal feeds, alcohol and cigarettes.

Of the industries covered by the survey, sugar-manufacturing units were found to be the most inefficient in exploiting resources.

Sugar-producing companies in the country had production capacity of 171,250 tonnes in the six-month period, but output stood at a mere 17,071 tonnes. This led average capacity utilisation rate of sugar-manufacturing units to dip to 9.97 per cent.

“Sugar-producing plants failed to make maximum use of resources in the six-month period due to industrialists’ decision to fix sugarcane prices at lower end, which prompted farmers to postpone sales of the product. Also, most of the sugarcane were yet to be harvested during the review period,” the report says.

Next in the list of highly inefficient companies was vanaspati ghee manufacturing units, whose average capacity utilisation rate stood at 23.71 per cent. This was followed by animal feed producing companies, whose average capacity utilisation rate hovered at around 33.33 per cent.

On the other hand, noodle-manufacturing units emerged as the most efficient companies. These firms produced 23,434 tonnes of noodles during the six-month period as against the total production capacity of 27,710 tonnes. With this, their average capacity utilisation rate stood at 84.57 per cent.

Surprisingly, readymade garment manufacturing units made it to the second spot in the league table of highly efficient producers.

These companies churned out 404,000 units of finished goods in the six-month period as against production capacity of 485,000 units. With this, average capacity utilisation rate of readymade garment manufacturing companies shot up to 83.24 per cent at the end of the six-month period, as against 66.69 per cent recorded at the end of last fiscal.

Next in line were cooking oil manufacturing companies, whose average capacity utilisation rate stood at 71.35 per cent, shows the report.

“We hope the average capacity utilisation rate will go up at the end of the fiscal as many factories, like those producing cement and steel, boost their production after the first half of the year when development spending goes up,” Min Bahadur Shrestha, chief of Research Department at NRB, told The Himalayan Times.

(Source: The Himalayan Times)