Kathmandu, January 29

The capacity utilisation of Nepali industries fell by 2.6 percentage points in the 2018-19 fiscal year compared to the previous year, as per a study report of Nepal Rastra Bank (NRB).

The Economic Activities Study Report published by the central bank recently shows that capacity utilisation of Nepali industries fell to 57.1 per cent in fiscal year 2018-19 compared to 59.7 per cent in the previous fiscal year.

Dwindling capacity utilisation of industries hints that the production of goods from domestic industries is inefficient. However, fall in capacity utilisation in the industrial sector amid implementation of favourable policies, regular electricity supply and end to frequent strikes from political parties and labour unions have raised eyebrows.

“The capacity utilisation of cement industries came down drastically in the review year as a number of new cement industries started production during the year. As a result, the overall capacity utilisation of the industrial sector came down in 2018-19,” reads the report.

As per the NRB report, the capacity utilisation of cement industries fell to 40.4 per cent in 2018-19 compared to 74.6 per cent in the previous fiscal year.

While capacity utilisation of beer industries was recorded at highest level of 99.7 per cent in the review period, the capacity utilisation of tyre industry was at the lowest of 15.8 per cent, as per NRB.

The Economic Activities report of the central bank was prepared based on the study of major industries in seven economic blocs of the country — Kathmandu, Biratnagar, Janakpur, Birgunj, Pokhara, Siddharthanagar, Nepalgunj and Dhangadhi.

Industrialists said that the mismatch between production and demand in the industrial sector had resulted in the fall of overall capacity utilisation of the Nepali industries.

“A number of new industries have been set up in the recent years, while the size of the market has remained the same. As the demand for goods did not rise in line with the increasing production, industries were forced to reduce their production,” explained Shekhar Golchha, senior vice-president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) — the largest private sector representing body.

The NRB report has highlighted that promotion of industries consuming local raw materials, raising production linking agro production to the industry, ensuring necessary infrastructure for industrial set up, developing skilled manpower in the industrial sector, promotion of special economic zones and exports, among others, remains the key challenges to boost the capacity utilisation of Nepali industries.

Golchha said that along with ensuring basic infrastructure and proper legislature framework for the industries to boost production, the government should also ensure necessary markets for rising production of goods.