Privatization plan hits snag as ministers put differing views on PEs

KATHMANDU, Dec 7 :

The government’s plan to privatize loss-making public enterprises (PEs) as announced through the budget for fiscal year 2014/15 has hit a snag due to differences between ministers.

While Finance Minister Ram Sharan Mahat is for privatizing loss-making PEs, who inflict loss of millions of rupees on state coffer every year, Industry Minister Mahesh Basnet wants to revive them.

The country altogether has 37 public enterprises.

Going against the program announced in the budget speech, Industry Minister Mahesh Basnet recently forwarded a proposal to the finance ministry for reviving eight PEs -- Birgunj Sugar Factory, Nepal Drugs Limited, Butwal Spinning Mill, Oriend Magnesite Limited, Janakpur Cigarette Factory, Nepal Metal Company, Agricultural Tools Industry and Hetauda Textile Industries.

After assuming office, Minister Basnet visited Birgunj Sugar Mills on October 23 and disclosed that his ministry was making needful preparations for reviving Birgunj Sugar Mills and Nepal Drugs Limited.

Though the mill was closed about a decade ago, 194 workers, who refused the payoff package, are still on the government’s payroll. The government pays them salary every month even though they do not have any work at all.

The government has been providing budget to PEs every year even though they are making loss and not feasible to operate at all.
Basu Sharma, chief of Privatization Cell at the Ministry of Finance, said privatization agenda does not work well with coalition government. “Nepali Congress is a reformist, while CPN-UML follows the concept of privatization with social responsibility. Similarly, UCPN-Maoist Party has no agenda about privatization. They have differing views on the issue,” he added.

The government privatized about two and half dozen enterprises in the 1990s. But most of such decisions have remained only in paper only due to policy difference among major political parties.

Rajan Khanal, joint secretary of the finance ministry, it would wrong to revive loss-making public enterprises as the government does not have the capacity and resources to manage them.

CPN-UML has always remained vocal critic of privatization. The party has criticized the government decision to privatize Harisiddhi Brick Factory and Bhrikuti Paper and Pulp Factory, saying that their assets were sold to private parties for peanuts. Industry Minister Mahesh Basnet, who is a CPN-UML leader, has publicly criticized the plan to lease out Oriend Magnesite Company to a private party.
A proposal to lease the Oriend Magnesite Company to Khetan Group is under study at the finance ministry.

In the budget speech, the government announced that public enterprises, in sectors where private sector is efficient and the government’s involvement is not necessary, will be operated under Public Private Partnership (PPP) model. In the budget speech, Minister Mahat had also announced that necessary amendments would be made to Privatization Act, 1994 to facilitate privatization of PEs.

Khanal, who was also a member of the study team on privatization of public enterprises, said that the government should run only essential businesses like media houses, Dairy Development Corporation, Nepal Airlines Corporation and Nepal Electricity Authority in which the private sector is not interested.

In the budget speech, the government also announced a program to merge public enterprises of similar nature to reduce their operating costs.

Source: Republica