Sick industries revival fund idle

KATHMANDU: A fund set up eight years for sick industries could not be utilised due to lack of easy access and high interest rates.

Currently there are 40 garment industries surviving and only 20 of them are operational, said Prashant Kumar Pokhrel, president of Garment Association Nepal (GAN). According to him, 92 per cent of the Nepal Rastra Bank (NRB) fund for sick industries is lying static since the last eight years, with less than eight per cent of the fund having been utilised. “NRB has set aside a fund of Rs 3 billion to help export-oriented industries, cottage and small industries and sick industries but the utilization rate is unsatisfactory,” said Pokharel.

Informing about initiatives being taken for easy access to the loan, Pokharel said, “During our recent meeting with the NRB governor we urged for some amendment in the policy so as to effect easy access to the loan for sick industries.”

Apart from remoteavailability, the charges also are high. NRB lends to commercial banks at one per cent interest rate while industries are charged minimum 12 per cent interest by the banks.

“The interest rate is very high for sick industries and the payback period is also very short — only six months,” said Pokharel. “The loan payback period should at least be three years and the interest rate on loan should not be more than four per cent.” Compared to export data of the year 2003, the total export of garment has gone down by nearly 90 per cent. The industries are facing numerous problems due to continuous strikes, raw material shortage and unsold finished stocks in the local market.

Though the NRB fund for export-oriented industries, cottage and small industries and sick industries was initiated in 2001, due to lack of easy access to it industries are not getting benefit. “We are fighting for our survival. The policy is not practical,” Pokharel said.

In 2008, Nepali readymade garment (RMG) worth $13,609,071.77 was exported to the US — a decline of 45 per cent compared to 2007 when the total value of Nepali RMG exported was $24,812,146.55.

Nepali RMG exports to the US witnessed a fall of 73 per cent this January compared to the same period last year. The total readymade garment exported to US this January was worth $7,06,964.17 which was Rs 2,650,747.91 in the same period in 2008.

In March, the RMG export to the US decreased by 31 per cent. Total export in March was worth $682410.88.