The government lent Rs 1.24 billion to moribund and sick public enterprises (PEs) to enable them to pay their various bills during the first half of the fiscal year, said a government report.
The money would be used by the state-owned enterprises to pay the salaries, allowances and retirement benefits of their employees and repay loans. The loans are also intended to be used to pay the costs of holding annual general meetings (AGM), pay taxes, purchase raw materials and print books.
A majority of the PEs that received loan investments from the government are either closed or financially troubled. National Construction Company Nepal (NCCN), Nepal Metal Company, Butwal Spinning Mill, Nepal Railway Company, Nepal Drugs, National Productivity and Economic Development Centre and Nepal Orind Magnesite have been given money to pay the salaries of their existing and retired employee and administrative expenses. Janakpur Cigarette Factory, whose employees were paid off last year, was provided Rs 140 million to pay income tax, VAT, excise duty and taxes owed to Janakpur Municipality.
Similarly, Janakpur Education Materials Centre was given a loan to print course books and buy raw materials and machinery parts. Nepal Orind Magnesite, whose revival plan has been put on the backburner after a new Industry Minister took charge, received a loan from the government to pay the legal fees for its court battles.
Likewise, Nepal Metal Company, which is immobile, received money to hold its AGM. National Trading Limited and Janakpur Cigarette Factory received funds to settle their bank loans. “Due to lack of a clear policy on loan investment in PEs, the trend of borrowing money to pay employee benefits, repay loans and even government taxes has been increasing,” the report said.
The Finance Ministry had recently asked the government to take National Trading Limited and Nepal Railway Company off the hands of their line ministries, the ministries of Commerce and Physical Infrastructure respectively. The Finance Ministry has stated that there is no sense in continuing to operate them by making additional investments. However, the Finance Ministry failed to get the approval of the concerned ministries to do so, the Mid-Term Review report said.
Although National Trading has been deemed to be unnecessary for the country, the government made a loan investment of Rs 500 million in it so that it could repay its bank loans. Likewise, Nepal Railway received Rs 17 million to pay its retired employees. Its dissolution has stalled as the government is yet to settle issues related to paying off the permanent staff.