Kathmandu: For years, the revival of Nepal’s state-owned industries remained a recurring political catchphrase, utilized by successive governments to gain easy popularity without any tangible follow-through.
However, the current administration, borne out of the momentum of a new political era and led by Prime Minister Balendra Shah, is finally translating these promises into administrative action. Moving beyond mere rhetoric, the government has officially initiated the process to determine the fate of seven major ailing public enterprises, marking a significant departure from the stagnation that characterized the last several leadership cycles.
Central to this initiative is the Due Diligence Audit (DDA), an essential financial and legal assessment designed to evaluate the true worth and liabilities of these dormant giants. The Prime Minister’s Office has directed both the Ministry of Industry and the Ministry of Finance to prioritize this evaluation for the Janakpur Cigarette Factory, Gorakhkali Rubber Industry, Udayapur Cement, Hetauda Cement, Nepal Metal Company, Butwal Yarn Factory, and Nepal Orind and Magnesite. While a preliminary decision to conduct such audits was made over a year ago, the plan sat idle until the current leadership pushed for its immediate execution. Currently, the Financial Sector Management and Corporation Coordination Division is working around the clock to finalize these reports.
Significant progress has already been made in this regard. DDA reports for Gorakhkali Rubber, Hetauda Cement, Janakpur Cigarette, and Nepal Metal Company have been completed, while the audit for Udayapur Cement is in its final stages. The assessments for Butwal Yarn and Nepal Orind and Magnesite are still underway. These audits are the first critical step toward investment management, a term that effectively signals a move toward privatization or a complete restructuring of government equity. By identifying whether these companies have positive or negative net worth, the government aims to present a transparent case to potential private investors or strategic partners.
The strategic direction for these industries is increasingly leaning toward the Public-Private Partnership (PPP) model. The government’s latest budget has already laid the groundwork by announcing plans to reduce the state’s share in enterprises like the Dhauwadi Iron Industry and managing the assets of seven other public institutions through private sector involvement. According to the Privatization Act of 1994, there are several modalities for operation, ranging from management contracts to full equity sales. The current goal is to minimize direct government involvement in daily operations while leveraging private sector efficiency to breathe life into these dormant assets.
Revitalizing these industries is not merely about balancing books; it is seen as a catalyst for broader economic growth. Industry officials emphasize that these factories could utilize locally produced raw materials, thereby creating a value chain that reaches rural farmers and labourers. Such a revival would generate thousands of jobs for the country’s youth, potentially stemming the tide of foreign migration and reducing the trade deficit by replacing imports with competitive, domestically manufactured goods.
However, study committees have warned that while revival is possible with new technology and professional management, the existing archaic structures are fundamentally incapable of surviving in a modern market without a total overhaul.
A standout example in this revival campaign is the Hetauda Textile Industry, which was officially liquidated in 2012 but is now being resurrected under the Prime Minister’s personal supervision. In a unique collaboration, the Nepal Army has been tasked with conducting test productions.
With a small initial budget, the army is cleaning the facility and testing whether the existing machinery can still weave fabric from imported yarn. If these tests prove successful within the next two months, a Detailed Project Report (DPR) will be drafted to determine the long-term operational model. This hands-on approach represents a pilot project for how other defunct industries might be assessed before full-scale investment.
By shifting away from the irresponsible mindset that government property belongs to no one, the administration hopes to prove that public enterprises can be competitive if managed with transparency and private-sector discipline
Despite the newfound momentum, experts caution that four major systemic hurdles must be addressed to ensure sustainability. First, the boards of directors must be comprised of technical experts rather than political appointees or bureaucrats who lack industry-specific knowledge. Second, the appointment of General Managers must be based on professional merit with strict performance-based contracts. Third, these institutions must be insulated from political interference and the disruptive influence of partisan unions. Finally, there must be a commitment to installing modern technology, as operating on 1970s-era plants without a competitive business plan will only lead to further financial ruin.
The financial mountain these industries must climb is staggering. Official reviews show that companies like Butwal Yarn and Nepal Orind Magnesite have accumulated losses in the billions, with their net worth long since turned negative. Janakpur Cigarette Factory, for instance, carries billions in debt that it has failed to service for decades. Even operational entities like Udayapur Cement are struggling with mounting liabilities and expired mining licenses. The government is currently working to resolve these legal bottlenecks, such as renewing limestone mining permits for Udayapur, to ensure that once these industries are transitioned to a PPP model, they have the necessary resources to actually function.
This ambitious plan is a direct attempt by Prime Minister Shah to fulfil his vision of industries as the backbone of the nation. By shifting away from the irresponsible mindset that government property belongs to no one, the administration hopes to prove that public enterprises can be competitive if managed with transparency and private-sector discipline. Whether this latest push will finally break the decades-long cycle of industrial decay depends entirely on the government’s ability to remain firm on policy reforms and resist the political pressures that originally led to the downfall of these industries.
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