Nepali industry operating at 44.7pc capacity, says NRB
KATHMANDU, MAY 22 -
A recent study done by Nepal Rastra Bank (NRB) has revealed that factories struggled to utilise their full capacity in the first half of this fiscal year in a reflection of the poor state of the country’s industrial sector.
The average capacity utilisation of the industrial sector in the first half of the current fiscal year was 44.7 percent. The NRB report entitled Economic Activities Study Report shows that manufacturing units at the country’s major industrial hubs have been running below their capacity. The study was carried out in eight major cities — Kathmandu, Biratnagar, Janakpur, Birgunj, Pokhara, Siddharthanagar, Nepalgunj and Dhangadhi.
Though capacity utilisation was better than in the first half of the last fiscal year, industrialists say it is still below ideal levels. According to the report, the beer industry has the highest capacity utilisation of 77.5 percent, while the sugar industry has the lowest capacity utilisation of 11.2 percent.
The report cited political transition, poor security, energy shortage, increased labour cost, lack of raw materials, strikes and bad labour relations as reasons for the low capacity utilisation.
“The study found that production of soybean and mustard oil, dairy products, wheat flour, biscuits, animal feed, noodles, liquor, soft drinks, pashmina, garments, paper and plastic products, cement, GI and electric wire and processed leather has increased while production of vanaspati ghee, rice, yarn, synthetic textiles, jute products, soap, bricks, iron rods and corrugated sheets and chemical items including drugs has declined,” said the report.
Industrialists pointed to the low competitiveness of Nepali products compared with Indian products as another reason for the low capacity utilisation.
“Most Nepali industries cannot compete with Indian industries due to which they have lost their once extensive Indian market. This has led to factories concentrating on the local market,” said Anand Bagaria, managing director of the Nimbus Group.
The NRB report states that attracting local and foreign investment by creating a conducive investment environment by improving industrial security and reforming labour relations would be a major challenge.
Despite the weak capacity utilisation, lending by banks and financial institutions (BFIs) to industrial enterprises surged 8.7 percent to Rs 252.34 billion in the first six months of this fiscal. Of the total industrial loans, the manufacturing sector has the lion’s share of 56.8 percent, followed by the construction and service sectors. Mining received the least amount of loans with 4.4 percent.
Economist Bishamber Pyakurel said the growth in industrial loans show that investors were still investing money in establishing factories or enhancing their capacity despite the gloomy situation. “The fact that a major chunk of bank loans has gone to the manufacturing sector is a positive sign because it not only helps to replace growing imports but also helps to generate employment at home,” he said.
According to the report, industrial units in and around Kathmandu got the maximum amount of industrial loans (66.6 percent) followed by Birgunj and Biratnagar. Dhangadhi was at the bottom of the list with 1.2 percent.
Source: The Kathmandu Post
