Nepal’s industrial sector is teetering due to different reasons. The sector, that contributed 19 percent to the Gross Domestic Product (GDP) at one time after the country adopted free market economy and economic liberalization, has now shrunk to 14-15 percent. The annual growth rate of the sector is not even 1-1.5 percent in the past few years. Political instability has become the greatest obstruction for industrial expansion in Nepal. The environment to operate factories is gradually deteriorating due to instability and the trade unions, opened as the sister organizations of political parties, are creating problems in industrial development. The right to open trade unions for welfare and benefit of workers has been abused here. Though license system and red-tapism, that stifle the process of opening industries, have reportedly been done away with in principle, operating industries/businesses is not as easier as said due to the unlimited power given to the government officials and the tendency to misinterpret the laws. There seems to be this tendency of removing or cutting the rights provided by the Industrial Enterprises Act through economic ordinances. A new industrial policy was made for development of the sector but even the drafts of the supporting laws have not been prepared yet. The facilities provided by one act are denied by citing the provisions in another in lack of coordination among the government bodies. Operating a new industry in this situation is becoming harder.
Energy crisis, apart from all these problems, has become the main hurdle for industrial development in Nepal. There is supply of hardly 800-900 MW, including imported electricity, even though the demand has crossed 1,100 MW while not even 500-600 MW is being supplied during the peak hours. New big, medium and small industries have not been opened inside the country due to energy shortage while even the existing ones cannot be operated in full capacity. A recent survey by the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) shows that big and medium sized industries are only operating at 55-60 percent of their capacity, and they have to depend on their own diesel plants to even operate at that level. Cement and iron industries—that need to heat their furnaces round the clock—are facing problems in lack of adequate energy. Operation cost of the industries has risen as they have to generate thermal energy using expensive diesel and Nepali products are becoming expensive. Nepali products are losing even the international market as similar goods produced in competing nations are available at a cheaper rate and the ratio of export to import consequently has reached 1:7 which is the major reason for raising Nepal’s trade deficit.
It is essential to solve the problems currently miring the sector if we are to accelerate the pace of industrialization, boost export and maintain domestic self-dependence, and ensuring regular supply of energy is absolutely necessary for that. The decision by the Nepal Electricity Authority (NEA) to supply electricity to factories round the clock through dedicated feeders by charging double tariff, in this context, has to be taken positively. The industrialists were demanding that as it is a little cheaper than operating diesel plants on their own. But the electricity supplied to domestic consumers should not be unfairly cut in the name of round the clock supply of electricity to the industries. The decision will become truly successful only if that is ensured.
Source : Karobar Daily