KATHMANDU, June 5: Capacity utilization of industries increased by 3.8 percentage points to 58 percent over the first six months of Fiscal Year 2017/18, reflecting a slight improvement in the usage of resources and plants by industries.

In the corresponding period of the FY2016/17, the average industrial capacity utilization rate was 54.2 percent.

According to Economic Activities Study Report of the Nepal Rastra Bank (NRB) released on Monday, the country observed recovery of capacity utilization rate on accounts of improved supply of electricity, successful completion of elections and progress in reconstruction works.

While the central bank report shows improvement in the capacity utilization rate, it also shows that industries are not realizing their full potential. The study report implies that the 42 percent of industrial capacity remains unutilized.

In its study report based on survey and interactions with stakeholders in 57 districts of the country, the central bank found the outlook of the industrial sector for the current fiscal year positive.

“Based on the output of industries, capacity utilization rate and interaction with industrialists in the review period, the outlook of the overall industrial sector for the current fiscal year is positive,” reads the study report. 

Uninterrupted electricity supply, political stability and reconstruction drive helped industries: Report

Soft beverage industries operated at almost full scale with capacity utilization rate at 99.93 percent in the first six months of FY2017/18. Pashmina industries came second, as capacity utilization of one of the leading export industries remained at 99.64 percent. Industries producing vegetable ghee, beverage, readymade garment and pashmina saw growth in capacity utilization in the review period compared to corresponding period of FY2016/17.

However, industries producing noodles, animal feed and wheat flour, among other products, saw a drop in capacity utilization rate. Sugar industries, on the other hand, has the worst capacity utilization rate as they utilized only 20.55 percent of their installed capacity in the review period. Similarly, capacity utilization of rice industries deteriorated further to 25.1 percent in the review period compared to 30.83 percent in the first six months a year earlier.

The capacity utilization of paper industries also fell to 29.04 percent from 38.68 percent in the first six months of FY2016/17, according to the report.

Reflecting the rise in the demand for construction materials in the wake of reconstruction drive, brick, cement, iron rod and electrical wires industries registered rise in industrial capacity utilization rate in the review period.

Observers say that the increased supply of electricity and growing stability in the country has boosted capacity utilization rate of industries.

“With reconstruction and economic activities gaining momentum, the demand is getting stronger which, in turn, has also increased capacity utilization rate of industries with the improved supply of electricity,” said Nara Bahadur Thapa, who heads the Research Department of the NRB.

“Serious efforts need to be made to improve capacity utilization of industries which are operating at a very low capacity,” he added.

 
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