On Monday, the government published the names of these industries in the Nepal Gazette opening the way for them to enjoy government facilities granted to enterprises in trouble.

Clause 25 (A) of the Industrial Act has mentioned clear cut provisions that only industries suffering losses for five years in a row and running at less than 20 percent of capacity are eligible to obtain the status of sick industry.

However, Nepal Boards of Bara, Birat Leather Industries of Hetauda, Birat Shoe Industries of Kathmandu, Basulinga Sugar and General Industries of Kailali, Shree Antu Tea Industries of Ilam and Gaida Wildlife Camp of Chitwan were awarded sick status although the recommendation sent to the Cabinet has not mentioned anything about their capacity utilization. Yam Kumari Khatiwada, spokesperson at the Ministry of Industry, said that the legal provision in the act regarding production capacity was confusing. “However, they have made the decision by doing a thorough study,” she said.

Even though the report has not included the annual production capacity, the technical committee assigned to identify the sick industries had concluded that all the companies given sick status had been operating at less than 20 percent of capacity, according to her.

The report has only mentioned the production capacity details of two industries—Sumi Pharmace-uticals based in Nawalparasi and Fluer Himalaya based in Birgunj, and they were found to be eligible to be granted sick status. Sumi was found running at 13.71 percent of its capacity while Fluer Himalaya was found running at 18.84 percent of total capacity, according to the report. Capacity details of Fulbari Resort and Dolphin Manor Hotel were not available.

Likewise, while the Industrial Act has stated that the industries should be in operation to acquire the status of sick industry, they have remained completely shut down. Five industries Nepal Boards, Birat Leather Industries, Birat Shoes, Basulinga Sugar and General Industries and Gaida Wildlife Camp have been closed for the past few years, according the ministry’s document. The report states that Nepal Boards has remained closed since May 2012, Birat Leather Industries and Birat Shoe Company have remained closed since June 2007,  Basulinga Sugar and General Industries has remained closed since March 2005 and Gaida Wildlife Camp has remained closed since June 2009.

Khatiwada said the decision had been made with the intention of bringing them back into operation. According to her, the industries will have to follow a set of rules including submission of a business plan, equity injection, halt to distribution of dividends for two years after starting to make profits and bar on diverting funds. If the industries fail to comply with these rules, they will have to return all the facilities and benefits provided by the government.   

The Industrial Act has offered sick industries a waiver on customs duty when importing goods necessary for their expansion and diversification. A high-level taskforce headed by former vice-chairman of the National Planning Commission Dipendra Bahadur Kshetry had recommended providing financial and non-financial facilities based on their requirement. Nepal Rastra Bank (NRB) in April 2014 had announced facilities for sick industries by categorizing them into two groups - industries that can be brought back into operation and those beyond revival. The central bank had proposed giving loans to the companies that could be revived.  As per NRB’s rescue package, bank and financial institutions will waive penal interest and keep the normal interest separate without recapitalising it.

If a bank wants to obtain NRB refinancing to provide loans to sick industries at cheaper rates, it will be provided at NRB-fixed interest rates. In case of industries that cannot be brought back into operation, they can get up to one year to sell off their collateral to repay bank loans. Earlier, when Shankar Koirala was the industry minister, a largely similar recommendation had been rejected by the Cabinet. “Since the act is confusing and the government was not being led by political parties, we could not reach a decision on sick industries at that time,” said Koirala who is also a former finance and commerce minister.