Rent increases up to 687 percent in industrial areas

Published On: August 5, 2022 01:15 PM NPT By: Dilip Poudel


KATHMANDU, August 5: Although the government has been saying that by putting efforts into creating an appropriate environment, it has prioritized encouraging domestic and foreign investment into the country, the reality is quite the opposite. Documents such as the constitution, plans and policies of the government, and budget, emphasize supporting the private sector. In addition to this, the government has always stressed that development in the country is/will be possible only through collaboration with the private sector.

However, it is the government agencies themselves that have been discouraging the private sector. The latest example is the decision of the government-owned Industrial District Management Limited (IDML). The government organization, with its decision to increase the rent of land plots in the industrial estates, has made it difficult for the industries in the areas to recover after they had been stagnant for two years due to COVID-19. Under the IDML, about a dozen industrial estates are operating across the country.

The rent of the industrial plants in these industrial areas has increased by up to 687 percent. The IDML has been accused of spoiling the industrial environment by raising the rent too quickly. The umbrella organizations of the private sector have protested against the government's ‘unreasonable’ increase in rent.

Organizations including the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) and the Confederation of Nepalese Industries (CNI) have demanded immediate cancellation of the decision. A few days ago, the IDML decided to increase the rents of the land plots occupied by the industrial units operating under it by 90 percent to 687 percent.

This government-owned organization has also insisted that the industrial units pay the rent for the past five years at the current rate. The industrialists were paying rent at the old rate until now. 

The IDML, which has already collected the rents for until the middle of July, has written to the industrial plants asking them to pay the increased rent for the last five years. There are 687 industrial plants in operation in Balaju, Patan, Bhaktapur, Pokhara, Butwal, Dharan, Nepalgunj, Birendranagar, and other industrial estates under the IDML.

According to a businessman, the annual rent in the Balaju Industrial Area was Rs 16,000 per ropani in the past, but now it has been increased to Rs 81,000 per ropani. The rates of rent are different in each of the industrial areas; hence the percentage that is increased is also different.

Chandra Prasad Dhakal, senior vice president of FNCCI, mentioned that since the rents were increased unreasonably, he had requested the government not to implement the decision. “There should be a scientific basis for the increase in the rent,” Dhakal commented.

Minister for Industry, Commerce, and Supplies, Dilendra Prasad Badu has said that the government is ready to review the decision after the private sector opposed the rent hike. However, no decision has been made yet.

“The rents have been increased to the detriment of the industrial environment. We have drawn the attention of the government to withdraw the decision to increase the rent,” said Krishna Prasad Adhikari, acting president of CNI. He mentioned how the industrial units within the industrial areas across the country have provided employment to 30,000 people and contributed about Rs 50 billion to the government’s revenue. “The decision to increase the rent has not been thought to promote entrepreneurship,” he added.

However, Prakash Khadka, information officer for the IDML, claimed that the rent increase was timely. He said that the rent had to be increased to timely manage the roads, electricity, water, and other infrastructures in the industrial areas.  

He said that there is also a lack of budget for maintenance and demolition works in the industrial areas. Khadka claims that the rents in the industrial areas are much cheaper than the market rent. According to industrialists, rents in the industrial areas should naturally be cheaper than outside locations. Industries are established in such areas because of the very reason that they have cheaper rents and other physical infrastructure.

The IDML had tried to increase the land rent before as well. The private sector had protested against the organization’s decision to increase the rent of the land plots from 17 July 2018 due to which the decision was not implemented then. Now, the government organization, referring to the decision of 2018, says that the industrial units have to pay the increased rent since the previously mentioned date. This has created more controversy.

 


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