Rising Toll  

The annual review report of the state of the Public Enterprises expose how the loss-making enterprises are bleeding the national exchequer

By A CORRESPONDENT

On the eve of the budget announcement, the government revealed the annual review report of the Public Enterprises (PEs) for the fiscal year 2004/05. And just like the Economic Survey report released the same day, the PE report – also published by the Ministry of Finance – exposed the sorry state of affairs.

For a country like Nepal and in a situation like these, it is a sad note that the total operating losses incurred by 38 PEs is Rs 5.91 billion. And despite the calls for deepening reforms, the total loss made by these state-owned-enterprises during the review period have soared by 22 percent compared to the last fiscal year’s loss of Rs 4.85 billion.

Likewise, the total liabilities of the government in the PEs have increased during the review period to reach Rs 14.29 billion – an amount that is almost double of Rs 7.84 billion last year.

Even as experts consider privatization as a solution to this problem, the government has failed to move in this front. During the review period, property of Bhaktapur Brick Factory was sold while land and building was given on lease for 10 years, although the budgetary target was to either privatize or liquidate 10 such PEs.

According to the report, such dismal performance is an effect of lacking corporate culture, deteriorating financial discipline, over-staffing, and erosion in efficiency as a result of politically infected bureaucracy combined with rampant corruption.

The report further reveals that return from these state-owned entities is too low compared to the investment. The government earned dividends worth Rs 1.52 billion, which is 2.58 percent of its equity investment of Rs 59.04 billion. The government so far has invested a total of Rs 110.81 billion including Rs 59.04 billion share investment and Rs 51.77 billion loans.

As per the report, of the total 38 PEs, only 18 were able to earn operating profits during the period.

Nepal Oil Corporation (NOC) has earned the dubious distinction of being the single-largest loss maker. Its total loss accounts to Rs 3.02 billion, whereas the highest profit making PE is Nepal Telecom that posted an operating profit of Rs 3 billion.

But even the NT is facing pressures in the recent months due to the suspension of prepaid mobile services. Following the disruption in the operation of mobile services since February 1, the state-owned Nepal Telecom (NT) has lost income by nine percent, according to senior officials. Because of the disruption of mobile services, the income in the fiscal year 2061/62 decreased by nine percent compared to fiscal year 2060/61.

In a dual blow, the NT was recently stopped from going ahead with the planned operation of Code Division Multiple Access (CDMA)-based wireless telephone service. The Supreme Court (SC) issued an interim order asking it not to go ahead with the operation of the service. The NT is accused of planning to operate the service without receiving license for the same from the Nepal Telecom Authority (NTA).

On the other hand, national flag carrier Royal Nepal Airlines Corporation (RNAC) – which was once a profit-making institution – is on the verge of financial ruin. The corporation is in dire need of new aircraft. But its credibility and image have taken such a beating that its request for domestic commercial banks for loan to purchase new aircraft have not been answered, according to recent news reports. Another PE Royal Drugs Limited, too, has been on the downhill path in recent months.

As the public enterprises have created a gaping hole in the national coffer, there is an urgent need to bring about reforms in their performance by pursuing appropriate measures at the soonest.