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Policy Options for Public Enterprises Reform in Nepal: A look at two public enterprises

Samriddhi Foundation has released a new policy analysis paper on Nepal’s Public Enterprises. The policy analysis paper titled “Policy Options for Public Enterprises Reform in Nepal: A look at two public enterprises” is prepared under the banner of NEGA 2014, which is preceded by NEGA 2012 and NEGA 2013. The Nepal Economic Growth Agenda (NEGA), first released in 2012, is an annual effort of Samriddhi Foundation to identify key constraints to Nepal’s economic growth and policy options for reform. NEGA 2012 identified and discussed policy constraints in five growth sectors of Nepal viz. Agriculture, Education, Hydropower, Transport Infrastructure and Tourism. NEGA 2013 focused on six cross-cutting issues viz. Industrial Relations, Contract Enforcement, Anti-Competitive Practices, and Foreign Direct Investment, Public Enterprises, and Regulatory environment for doing business. NEGA 2014 builds on The Foundation’s previous studies on hydropower, industrial relations and public enterprises. Of the three study reports produced under NEGA 2014, this study on public enterprises proposes policy options for reform of public enterprises through two case studies of Nepal Airlines Corporation (NAC) and Hetauda Cement Industry Limited (HICL). This policy analysis paper has been prepared in consultation with individuals and groups who are experts in the area or are involved in the mentioned organizations.

This policy analysis paper takes a look at two of the thirty six existing public enterprises in Nepal to propose concrete policy options for reform. Both NAC and HICL have been facing high cumulative losses and presence of unfunded liabilities due to operational inefficiencies and other problems. This paper analyses the poor performance of public enterprises from a policy perspective with an aim of identifying practical reform options and these reform options are mainly focused on improving the organizational efficiency either by bringing changes in the current working modality or by introducing a new modality based on a cost benefit analysis. The larger objective of conducting such analysis on two loss making PEs is to pave way for similar analysis of other public enterprises which are increasingly becoming a burden on taxpayers and consumers.

The paper can be downloaded here.

Sarita Sapkota

About Sarita Sapkota

Ms. Sapkota is the Coordinator of Communication and Development at Samriddhi Foundation and was previously engaged with the Foundation as a Research Associate for more than three years. She is a graduate of political science and also contributes articles for Samriddhi's column at The Himalayan Times' Perspectives supplement.

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Nepal Airlines Corporation and its woes


Image Source: Wikipedia


Recently, the Nagrik Dainik published a news article which stated that Nepal Airlines Corporation (NAC), our only national airlines would have to halt all its flight during the festive occasion of Dashain. Apparently, the NAC had only got one functioning aircraft which it had hoped would help in providing services to the people of the remote area. However, the aircraft in question had been recently used by the Minister of Culture, Tourism and Civil Aviation. The Minister  had apparently  used the aircraft  for more than the stated time thereby rendering it  impossible to use the aircraft  as its engine would not be able to fly the required distance. The ailing carrier and its delays are not a new thing. It has been named the top among the 15 worst airlines in the world for economy travel by the Business Insider.

Delays due to engine failure, lack of proper maintenance are not new things for the NAC that was operating with its two old Boeing. It has only recently been approved for a loan by the Employment Provident Fund to purchase new Boeing. According to news reports, the collateral of the corporation property had been placed against the loan. The ailing industry loss is an estimated 180 million rupees. The purchase of these aircraft is very crucial for NAC as it wants to tap potential profits from its international route. The main problem of this ailing carrier is the political interference and mismanagement at the administrative level.

According to the Annual Report of Public Corporation/Enterprises 2069 (2012) published by the Ministry of Finance stated that the NAC in the year 2069 B.S had 1411 officials working under it. To be noted is the fact that the NAC currently has 2 aging Boeing and a few aircraft for domestic flights which are currently not in use due to maintenance work. Hence, NAC has more than 1400 people looking after two aircraft.

To make matters worse, NAC might even lose its ground handling tenure at the Tribhuvan International Airport (TIA). The  Civil Aviation Authority of Nepal (CAAN)  has recently announced that if the NAC did not improve its ground handling facility which at the present consists of 2-3 buses and baggage handling which have led to luggage damages; it would be announcing a global tender in 2014. The NAC despite stating that it would be improving its services has not been able to provide efficient service so far. Even in terms of domestic travel, it is seen that privatized companies have been faring better than NAC. According to Nepal Transport Plan: Current Situation and Diagnostic (2012) published by Civil Aviation Authority of Nepal,  the flight movement and the total number of passengers of private domestic flights are comparatively  higher than NAC, especially Buddha Air and Yeti Air that are presently leading the domestic airline market.

By only purchasing new aircraft will not help in reducing the losses of the NAC. Instead ensuring proper service and maintenance of its aircraft for timely flight should be the most crucial objective for the NAC at the present. This will only happen, if decisions of the NAC are not mired for political reasons. Furthermore, NAC has to have a competitive approach towards growth like the private airlines which are operating domestic flights in the country. They have so far been successful in catering to the transportation needs of the people compared to the NAC. These private airlines are always at a stiff competition with each other,  trying to upgrade their services to attract more customers. NAC seems to have been left far behind in the race towards achieving a successful flight towards progress. It can only achieve a comeback by not just buying new aircraft but ensuring in the long run that the services it provides is timely and meets a minimum standard. Organizational restructuring into a public-private partnership model could be one option for this.

About Astha Joshi

Astha completed her undergraduate degree in Politics, Philosophy and Economics (PPE) and is working as a research assistant at Samriddhi, The Prosperity Foundation.

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