Nepal's public enterprise investment up 13%, but dividends fall

Government investment in public enterprises saw a significant 13.4% increase, reaching Rs798.56 billion in the last fiscal year. However, this surge in investment did not translate into improved returns, as dividend income declined by over 5% to Rs8.37 billion. The primary reason for this downturn is the substantial losses incurred by 16 out of the country's 45 public enterprises.

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Institutions established with social objectives are expected to provide public services rather than focus solely on profits. But operational efficiency and effectiveness are still essential.

Nepal Airlines Corporation stands out among the loss-making entities, accumulating over Rs18.90 billion in losses. Many state-owned industrial enterprises, including Dairy Development Corporation and Hetauda Cement Industries Limited, are also operating at a deficit. Some, like Butwal Spinning Mills Limited, remain non-operational yet continue to accrue administrative costs.

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The main challenge is maintaining a balance between the social responsibility of producing and distributing public goods and services and the commercial objective of making profits.

These persistent losses have ignited concerns regarding the governance and management efficiency within these public enterprises. Experts point to outdated technology and intense market competition as key factors contributing to the financial struggles. While some enterprises possess quality resources, they fail to compete with private sector efficiency due to technological lags. The challenge lies in balancing social responsibilities with commercial viability, a task made difficult by outdated laws and limited autonomy that impede quick responses to market demands.

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There is a lack of objective laws, policies and institutional mechanisms to realistically assess returns on government investment and justify the continuation of such investments.