Manufacturing industries in revival pains

Kathmandu, Aug 13

Despite multiple efforts by the government, business organisations and entrepreneurs, the manufacturing sector across the industries is struggling hard to revive.

The lifting of lockdown on July 21 had raised hopes among the entrepreneurs of running the industries smoothly, but the reality has been otherwise as many industries are facing troubles since the supply has not been smooth as expected, and the demand has gone down compared to the pre-coronavirus situation.

According to the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), the large enterprises are in trouble again due to the larger number of their workers.

At the same time, many industries are facing fresh constraints to remain in operation with the imposition of lockdown and restrictions in major industrial hubs such as Biratnagar, Birgunj and Butwal.

The food and essential goods sector is about to enter the recession phase on the eve of the great festival season as the contraction in cash flow was likely to prolong.

“It is likely that the food industries face the brunt of the pandemic that hit the country five months ago. The distributors and the industries are not getting the money from the market,” said Satish Kumar Bohra, Managing Director of the Bohra Group, which runs the food manufacturing industries.

The food items are distributed to the distributors and retailers, including the hotels and restaurants on short-term credit. The abrupt shut-down of the businesses on March 24 had brought all the business operations and industries, except foods, medicines and other essential goods, to a grinding halt. As most of large hotels and restaurants have not come into operation and entrepreneurs are restlessly waiting for the normalcy, a large amount of food industries and suppliers’ money is stuck in the market.

“The initial days were good as the supply swelled due to the growing demand in the market. But sales have recently suffered and items are stockpiled at the distributors and retailers,” said Bohra. The government has not announced any relief programme, including discount in the interest rates to the food industries.

Only about 35 per cent industries in this sector are in operation and the recent analysis of the central bank showed that more than two-thirds of the industries are not operating correctly, Bohra maintained. According to him, some of the industries will be closed if the cash flow stuck and the supply does not increase for a week.

Likewise, small industries are waiting for a new modality as well as further support to remain in the business.

“Small enterprises are at the greater risk as there are no concrete policies with special focus to the sector. Many of them are unable to obtain the survival loans or refinancing facility announced by the central bank,” Chairperson of the FNCCI’s Cottage and Small Industry Committee, DB Basnet said.

The small enterprises are the largest creator of jobs and self-employment. Destabilisation in the sector could have severe repercussion on the jobs and local economy.

According to Basnet, some entrepreneurs have left the business and some have not returned to their businesses in the cities from villages. The FNCCI is deliberating on the modalities to support the small enterprises but there should be greater collaborations among the state and non-state actors to provide relief to them.

“About 50 per cent small enterprises are facing challenges in operating their businesses and managing funds. Many workers have not asked for their salaries as they know that their employers are not able to pay them,” said Basnet.

Published in The Rising Nepal daily on 14 August 2020.