In a renewed push toward public enterprise reform, the Government of Nepal has initiated the privatization process for four defunct state-owned enterprises (SOEs): Janakpur Cigarette Factory, Butwal Yarn Factory, Nepal Metal Company, and Nepal Orind and Magnesite Company. These entities have remained closed for years and continue to impose significant financial burdens on the state.
Key Developments:
- The Ministry of Finance (MoF) has issued public notices to hire consultants for property valuation, an essential step toward privatization or liquidation.
- The deadline for submission of Expressions of Interest (EOIs) for Janakpur Cigarette Factory is July 7, while the other three entities have a submission deadline of July 11, 2025.
- These efforts align with recommendations from the High-Level Economic Advisory Commission, led by former Finance Secretary Rameshore Khanal, which urged the scrapping of five underperforming SOEs.
Current Status of Targeted Enterprises:
| Enterprise | Status | Cumulative Loss |
|---|---|---|
| Janakpur Cigarette Factory | Closed for 14 years | Rs 2.92 billion |
| Nepal Orind and Magnesite Company | Inactive | Rs 5.03 billion in loss; Rs 2.40 billion in government dues |
| Butwal Yarn Factory | Closed for over 15 years | Rs 2 billion |
| Nepal Metal Company | Net assets Rs 178.3 million | Owes Rs 920 million to government |
Policy & Legislative Context:
- The Privatization Bill (First Amendment) Ordinance 2081 BS, passed last March, enables the government to:
- Float shares publicly,
- Merge failing enterprises,
- Liquidate fixed assets as per situation.
- To counter public criticism, the government has strategically reframed privatization as “asset management.”
Wider Government Strategy:
- The Cabinet has already decided to begin asset management of seven SOEs, including Gorakhkali Rubber Udyog, Udayapur Cement, and Hetauda Cement Factory.
- The FY 2025/26 budget supports this reform agenda, signaling broader restructuring of loss-making PEs.
Background & Concerns:
Nepal’s privatization efforts date back to the early 1990s under its liberalization agenda. However, past attempts have been widely criticized for:
- Lacking transparency,
- Failing to promote market competition,
- Resulting in minimal returns to the government.
A 2018 White Paper by then Finance Minister Yubaraj Khatiwada acknowledged these failures, stating privatized enterprises “neither fulfilled the objectives of privatization nor added value to services, products, and employment.”
Looking Ahead:
While the government now seeks to adopt a more structured and transparent approach to SOE reform, success will hinge on:
- Transparent valuation processes,
- Effective stakeholder engagement,
- Long-term planning for post-privatization regulation and oversight.
This renewed effort could signal a turning point in Nepal’s fiscal and structural reform agenda, aiming to reduce public sector inefficiencies and mobilize private sector participation in productive sectors.
