Despite its promises to reform public enterprises (PEs), the government once again announced that some of the closed state-owned factories would be brought into operation. The government's policies and programs for the fiscal year 2023/24 reads that Hetauda Kapada Udyog, Gorakhkali Rubber Udyog, and Butwal Dhago Udyog be reopened for operation. The government’s announcement to run these defunct companies has come at a time when it has promised reforms of PEs that are using state resources without offering any noticeable benefits for the country and the people. While the government is seeking budgetary support of $200m from the Asian Development Bank (ADB), one of the conditions put forward by the Asian lender is that Nepal needs to commit to reforming PEs. A cabinet meeting on April 18 decided to form a public enterprises recommendation committee headed by former government secretary Shankar Prasad Adhikari. “If the government insists on running the closed state-owned factories without viable plans that require no extra injection of public money, there is the question about whether donors will be happy about the government’s move,” said an expert on public enterprises who chaired a task force on reforming PEs in the past. “It is better to let these companies remain closed if they are not operated commercially and independently outside the government and politicians’ influence,” the expert said, adding that the government has been forced to inject huge amounts of its resources into badly run public enterprises.

The government is currently in negotiation with the ADB to secure $200m as the government has a gap in financial resources for its failure to collect enough revenue. The government wants to get funding from multilateral donors in the form of budgetary support which the government can utilize in its prioritized sector. Donors want reforms in PEs and they have been suggesting against recklessly pouring public money into such enterprises.

Among the three factories, Hetauda Kapada Udyog, a textiles manufacturer, has remained closed since 2000 after it ran under huge losses and was subsequently liquidated in 2013. It is owned by Industrial District Management Limited. The factory is spread over 8 acres and possesses machines used in making thread, dyeing, and spinning. In fact, a task force headed by Economist Pushkar Bajracharya had even suggested the government let the factory be operated by the Nepal Army to produce necessary clothing items for it. Likewise, Gorakhkali Rubber Udyog, a state-owned tire company, has remained defunct since 2012. The loss-making entity incurred a net loss of Rs 685.5m in the fiscal year 2018/19 while its cumulative losses in the fiscal year 2018/19 amounted to Rs 631.5m, according to the Annual Performance Review of the Public Enterprises 2022 published by the finance ministry. It has the outstanding dues of loans to be paid as of 2018/19 stand at Rs 1.55bn. The factory needs to manufacture radial tires as per the market demands and new plants need to be established if it is operated, according to the annual performance review report. “For this, around Rs 2bn in investment is needed,” it said. According to the report, there had been a discussion about running it by giving it on a lease. Butwal Dhago Karkhana was established in 1983 with the aim of exporting yarn and thread to the international market. The mill started production in 1991, but within a decade its situation deteriorated as the trade union and employees attached to various political parties ran it into the ground with their endless strikes and interference.