The new committee was formed as per the government's commitment to the Asian Development Bank (ADB). The government has recently sought $200m from ADB in the form of budgetary support to finance the resources gap amid failing revenue collection in the current fiscal year. One of the conditions put forth by ADB to sanction the fund has been the implementation of public enterprise reform measures.
The latest report of the Office of the Auditor General (OAG) sheds light on the need for the reform of the PEs. According to OAG's 60th annual report, the return on the loan and share investments in PEs have been dismal. "The government till last fiscal year has invested Rs 374bn in loans and Rs 357bn in share investment in PEs," reads the report, "However, the returns have been negligible." Since most of the PEs are in losses, they have not even paid interest to the government. OAG has suggested that the goals and current needs of PEs having low returns should be analyzed and a necessary policy review should be carried out. Even though government investments in PEs have grown, the returns from such investments have been below par. A recent report by the Public Debt Management Office (PDMO) shows the dividend paid by the PEs to the government in the last fiscal year was the lowest in 13 years. As per the 'Initial Annual Report on Share and Loan Investment of the Government 2021/22', the government received only Rs 4.24bn in dividends from the PEs. The PEs' dividends to the government had reached a 13-year high of Rs 23.64bn FY 2019/20. Since then, the dividend amount has been in a downward spiral, shrinking to Rs 12.75bn in FY 2020/21 and declining further in FY 2021/22. Among the PEs, only nine have distributed dividends to their shareholders in the last fiscal year, according to the PDMO report. PDMO says that Nepal Telecom, Rastriya Banijya Bank, Agriculture Development Bank, Butwal Power Company, Nepal Stock Exchange, Salt Trading Corporation, Citizen Investment Trust, Civil Aviation Authority of Nepal and Sajha Sewa have distributed dividends from their profits. Nepal Telecom was the largest dividend payer with Rs 2.74bn in the last fiscal year. While the government has been forming committees for reforming PEs, their recommendations have rarely been implemented. The earlier Poudel-led task force in its report recommended to re-open 7 PEs that were either closed or running in losses. The report suggested bringing back the operation of Janakpur Cigarette Factory, Gorakhkali Rubber Industry, Nepal Orind Magnesite Pvt Ltd, Biratnagar Jute Mill, Hetauda Textile Industry, and Butwal Spinning Mills. The Finance Ministry report shows 42 out of 44 PEs are in operation in the country. But there is no uniformity in the law, procedures, and ownership of public institutions. The report says 33 PEs are being operated under the Companies Act while others are under various acts. Budget announcement on PEs
- The federal budget 2022/23 stated that "a policy of making the potential public enterprises under the government self-reliant and enhancing their capability to mobilize additional sources of investment would be adopted by transforming them into fully government-owned company models as per the need and listing them in the capital market."
- The federal budget of FY 2020/21 announced that the sick and closed industries would be revived with the participation of the private sector through additional investment, using new technology, and professional management.
- The federal budget of FY 2019/20 said that arrangements would be made to operate closed and sick industries in partnership with cooperatives and the private sector based on feasibility
- The federal budget of FY 2018/19 stated that arrangements would be made to operate closed and sick industries in partnership with cooperatives and the private sector based on feasibility.
