The country’s defence force has been in business for a long time. The Nepal Army sells petroleum products, is involved in road construction business, operates emulsion plants, and runs schools and medical colleges. It even sells bottled water.

In its new venture, the army will revive a long-shuttered textile factory. It has conducted an inventory to rerun the Hetauda Kapada Udyog, whose operation was suspended some 25 years ago. It was closed four years later.

On Wednesday, the army briefed Prime Minister Pushpa Kamal Dahal on its proposal to rerun the Hetuda Kapada Udyog. Listed as a “sick industry”, the government still looks after the land and equipment in the factory premises in Hetauda.

Nepal Army has been facing widespread criticism for its unnecessary involvement in business activities. At the heart of such projects lies the Kathmandu-Tarai fast track that has already been delayed by years.

At a high-level discussion, Prime Minister Dahal learned about the plan to rerun the textile factory based in the country’s south, according to a statement issued by Dahal’s private secretariat. The prime minister was briefed on the Army’s feasibility study.

Deputy Prime Minister and Minister for Defence Purna Bahadur Khadka, Industry Minister Ramesh Rijal, Chief Secretary Baikuntha Aryal, Defence Secretary Kiran Raj Sharma, Chief of the Army Staff General Prabhu Ram Sharma and other senior government and military officials were present in the session.

The Nepal Army conducted the feasibility study as per the government’s policy of reviving sick corporations or those shuttered in the past, read the statement. The Hetauda Kapada Udyog was established 48 years ago with the financial and technical support of the government of China. It ran smoothly for 24 years. The government led by then-king Gyanendra Shah shut down the factory after three years of closing the operations.

According to the summary of findings presented by the army on Wednesday, lack of market promotion, failure to upgrade technology, frequent power cuts, financial burden incurred due to overstaffing and mismanagement were the main reasons behind its closure.

The army estimates it will need to inject Rs1.93 billion to rerun the textile factory and it will cost Rs780 million to run it annually. And, as per the estimate, the company will start making a profit after nine years of operation, according to the report prepared by an army task force.

Some security experts said Nepal Army should not be involved in non-military activities but focus on enhancing its military capabilities.

It’s not common for the army to run businesses like this, said Geja Shamra Wagle. “A national army should not be involved in such non-military activities.”

Security experts say the army seems to be more inclined to doing business than limiting itself to its primary role of ensuring national security, gathering intelligence, protecting national parks and natural reserves and saving people’s lives in times of disaster.

“If the army is involved in non-military exercises, it will lose its main prowess and get bogged down into more controversies. This is not a good sign for the army’s well-being in the long run,” said Wagle.

In early 2000, the army had wanted to dive into commercial banking, hydropower projects, land plotting, and agriculture, among other areas.

The army leadership had already proposed a bill to revise the Nepal Army Act, seeking legal clearance to invest money from its welfare fund in business activities “as a promoter” but the law is yet to be amended.

A secretary at the Prime Minister’s Office said the idea was not bad but questions will still be raised about why the project is being given to the army, and why the government should not call competitive bids or adopt other methods to revive sick and shuttered public enterprises.

According to the defence force’s plan, after replacing some old machines and structures with the money from its welfare fund, the textile plant can be brought into operation. The fund has enough money for the investment, said the report.

The factory has 166 ropanis of land, has the basic set-up to run a textile plant, raw materials are available in the country and the output can be sold to the personnel of Nepal Army, Nepal Police and Armed Police Force, as well as to civil servants, among others, says the army task force about its viability.

“When Nabindra Raj Joshi was the industry minister, he had invited us to rerun the Hetuda Kapada Udhyog,” said former Army General Purna Silwal. “The original idea was to produce enough textile for the security forces, and all three security agencies would invest money through their respective welfare funds.”

But the plan did not materialise, said Silwal.

The army said that rerunning the factory will give a fresh impetus to the country’s industrialisation. If more such factories are brought back into operation, they will contribute to the country’s gross domestic product, replace imports, build self-reliance and create jobs, it says. The army has also proposed a modality to run the plant.

As per its three-year plan, a policy decision is needed in the first year to hand over the defunct company to the Nepal Army, which aims to produce 2.6 million metres of textile. Preparing a detailed project report, and procuring and installing machinery are other components of the plan, said the report.

In the second year, the national defence force will complete the infrastructure, procure machinery and equipment and begin textile production. In the third year, the army will add more machines and equipment to expand its capacity. It also plans to look into the inventory to run the Butwal Dhago Udyog as a spinning mill to supply the textile plant.

The Nepal Army has also called for legal and policy support from the government to hand over ownership by clearing outstanding liabilities, and ensuring that the textile manufactured in Hetauda is used by government entities, primarily to make uniforms for government workers.

Prime Minister Dahal is said to have lauded the army for the study. “I will discuss the idea at the political level and the Nepal government will form a small team to work out a way forward. Then the Cabinet will make a decision,” the statement quoted the prime minister as saying.

The prime minister stated that past policies of privatising companies sent out negative messages and some were sold at very low costs. “That totally disturbed the process of industrialisation in the country. Since our scope for job creation has shrunk, youths have started going abroad [in search of opportunities],” said Dahal.

But Wagle has a different view on this. “Allowing the Nepal Army to run the plant goes against the spirit of national security and in the long run, such involvement bodes well neither for the army nor the government,” he said, suggesting that the army focus on its core objectives.

General Silwal also agrees that the army should not be allowed to run the factory but it can be handed over to the private sector after some years. “The question is about opening and running factories no matter who takes the lead. If you have reservations over the army running the factory, an alternative model is private-public partnership,” added Silwal.