Public enterprises continue dismal performance despite massive state investments, post 2% RoI

Published On: May 27, 2020 07:05 PM NPT By: RAJESH KHANAL

KATHMANDU, May 27: The government’s revenue from the dividend of public enterprises in the fiscal year 2018/19 declined by 4.28% to Rs 9.47 billion, compared to the amount in 2017/18.

The poor performance of the public sector is revealed by the Annual Status Review of Public Enterprises 2020 unveiled by the Ministry of Finance on Tuesday. Apart from investing in equity of these enterprises, the government injects additional funds to these entities almost every year.  

Earnings from the dividend of the public enterprises is one of the sources of the non-tax revenues to the government. The revenue from the public enterprises are also likely to drop due to the prolonged lockdown. At a time when the government is struggling to manage adequate financial resources for the next fiscal year, the nation is closely watching the budget set to be announced on Thursday.

The dividend from the public entities also shows a low return on its massive investments. Based on the government investment of Rs 475 billion in the enterprises, the rate of return averages only 2% per annum.

There are 44 public enterprises operating in the country. Of them, 10 are manufacturing, 5 are related to public utility services, 5 in trading and commerce, 9 in financial services, 5 in social sector and 10 in service sector. The report shows that all the government entities involved in financial services made profit. However, only 4 out of 10 in manufacturing and 3 out of 10 in the service sector earned profit.

These enterprises provide jobs to 30,769 individuals, which is 0.43 percent of the total employed number of 7.08 million people, as defined by the Nepal Labour Force Survey 2017/18.      

The review report shows that the net profit of public enterprises in the fiscal year 2018/19 rose by 12.36 percent to Rs 48.77 billion. Out of 44 of these entities, 26 earned profit, totaling Rs 48.77 billion, an increase of 12.26%. Of them, 13 enterprises did not post profit.

The other five public enterprises are not in operation now. These include Janakpur Cigarette Factory, Electricity Production Company Ltd, National Transmission Grid Company, Nepal Orind Magnesite Pvt Ltd, and Butwal Spinning Mill, which have remained closed for a long time.  

Last year, the government merged poorly performing National Trading Limited with Nepal Food Corporation and formed the Food Management and Trading Company. Lack of clarity in the policy has been found to delay the government’s plan to merge or privatise the crisis-ridden enterprises. According to analysts, poor performance of the public enterprises is an outcome of an excess political intervention and managerial inefficiency. 


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