The acute shortage of liquidity, rising interest rates, and the slowdown in demand have hit the industries in Koshi Province badly in the first half of the current fiscal year. As industries grapple with multiple issues, their capacity utilization dropped by 8.3 percentage points in the first half of the fiscal year (FY) 2022/23. The average capacity utilization of industries in Koshi Province stood at 40.6 percent in the first half of FY 2022/23 compared to 48.9 percent during the same period of the last fiscal, states a new report of Nepal Rastra Bank (NRB). The decline in the capacity utilization of bricks, vegetable ghee, animal feed, cement, raw leather, synthetic fabrics, plastics goods, and iron rod production industries led to a decline in the average capacity utilization of the industries in Koshi Province.

According to the NRB report titled “Provincial Economic Activities Report-Koshi Province,” industries producing bricks, vegetable ghee, soybean oil, and raw leather have experienced a decline in their capacity utilization in this fiscal.

The NRB report says capacity utilization of the processed tea industry was highest at 85.4 percent while that of the bricks and vegetable ghee industries was the lowest at zero percent and 5.1 percent respectively. The capacity utilization of noodles increased by 80.7 percent, mustard oil by 79.9 percent, jute products by 74.5 percent, yarns by 65.7 percent, biscuits by 58.9 percent, and synthetic fibers by 58.1 percent. The central bank report shows the production of the sugar industry in Koshi Province surged by a whopping 190.7 percent and the rice industry by 68.4 percent. The production of the paper industry grew by 64.4 percent, the readymade garment industry by 26.5 percent, the GI wire industry by 20.2 percent, and the yarn industry by 11.6 percent. However, the production of the brick industry and soybean oil industry plunged by 100 percent and 89 percent respectively during the first half of FY 2022/23. Similarly, the animal feed industry and cement industry saw their production going down by 43.7  percent and 36.7 percent respectively. “The production of bricks has decreased mainly due to a delay in the supply of coal and a slowdown in market demand,” says the report. On the other hand, soybean industries’ capacity utilization suffered this year as soybean export to India slumped massively. With industries operating below capacity, the bank and financial institutions’ (BFIs) loan disbursement to them grew marginally in the first half of FY 2022/23. The BFIs’ loan disbursement to industries surged by 5.5 percent to Rs 127bn. The BFIs’ loan to the industrial sector had stood at Rs 121bn during the first half of FY 2021/22. The BFIs’ loans to the electricity and gas sector surged by 226.6 percent, the metal sector by 7.2 percent, and the agriculture sector by five percent. Of the total loans disbursed by the BFIs in Koshi Province, the share of the non-food-producing sector is the highest. The BFIs disbursed Rs 63.36bn (49.6 percent of total industrial loans) to the non-food-producing sector. The agriculture sector was the second highest recipient of industrial loans with the BFIs disbursing Rs 39.87bn in loans.