Nepal's manufacturing output has dropped sharply as lockdown restrictions slash demand, raising concern among officials and industry leaders.

According to the Ministry of Industry, Commerce and Supplies, essential industries like food, dairy, feed, hatchery and poultry, drinking water and tea are reporting a steep fall in production.

Most of the factories located in the country's five major industrial corridors—Attariya-Dhangadhi, Nepalgunj-Kohalpur, Butwal-Belahiya, Pathlaiya-Birgunj and Itahari-Biratnagar—are operating at below capacity.

Industry Minister Lekhraj Bhatta said the ministry was doing homework to ease the lockdown and draw up a new modality to unshackle factories making essential goods. He added that they were holding daily talks with industry insiders to increase production and market the goods.

Regarding dearer essential food items, Bhatta said that prices had not been raised that much. Prices of goods imported after the lockdown have gone up due to higher transportation charges, he said.

The production of factories making biscuits, noodles and snacks shrank from 80 percent of capacity in mid-March to 50-60 percent in the beginning of June.

The output of rice, beaten rice, lintels, flour and oil factories dropped from 75 to 55 percent of capacity during the same period. The ministry said that almost all food industries were in operation currently.

The tea industry, that was operating at 70 percent of capacity in mid-March, is operating at 30-40 percent. The ministry said production declined due to a decrease in demand for Nepali tea in Europe and inability to send samples for testing and certification.

Output is down also because the Indian government has stopped the import of Nepali tea, according to a report. Bhatta said there was no political reason behind the Indian move. Imports have been tightened in an effort to prevent the potential spread of Covid-19, he added.

The feed, hatchery and poultry industries also saw a drop in production from 80 percent of capacity to 40 percent. Poultry and hatchery industries are closing down as they have been severely battered by the lockdown.

The ministry said there was no problem in egg production, but with a decline in demand for broiler chicken, most poultry factories had pulled down their shutters.

Dairy industries that were running at 80 percent of capacity have slowed down to 60 percent. Local dairies are still in operation, but large enterprises including pasteurisation plants have shut down.

According to a report, the sugar industry has 40,000 tonnes of sugar in stock. Liquefied petroleum gas refilling plants are operating at full capacity.

The drinking water industry is operating at 60 percent of capacity, down from 100 percent before the lockdown, and is only producing water in jars. The production of drinking water in pet bottles came to a stop after restaurants and hotels closed down.

The medicinal drug industry has reported a drop in production from 70 percent of capacity to 60 percent. Demand is static, and the products have a short shelf life, so output has been slashed, the ministry said.

Oxygen plants, however, are operating at full capacity like before the lockdown, as per a report.

According to the ministry, only 338 of the 597 essential goods factories in 10 industrial areas are in operation. And even those still open are operating at around half their capacity.

And of the 11,736 workers employed by these factories, 4,900 have kept their jobs while 6,836 have been sent home on leave.

Bhatta said that factories producing ancillary goods such as packaging materials and other items were operating at 40-60 percent of capacity.