KATHMANDU: Finance Minister Rameshore Khanal and Minister of Energy, Water Resources, and Irrigation Kulman Ghising appear to have mutually contradictory approaches towards the private sector. While Finance Minister Khanal is making private-sector-friendly decisions aimed at boosting the morale of the private sector, which has declined following the Gen Z protest, Minister of Energy, Water Resources, and Irrigation Ghising is continuing to take actions that further provoke the private sector.

The stand taken by Minister Ghising on the issue of Dedicated and Trunk Line electricity tariffs, which has been disputed for a decade, has alienated the entire private sector. He has been accused of creating a tense situation by rapidly cutting off electricity to industries at a time when the private sector, already on the defensive after suffering huge damages during the Gen Z protest, should be provided with more encouragement.

“Now is the time to boost the morale of industrialists. Even if electricity tariffs must be collected, now is not the appropriate time. The decade-long dispute does not have to be resolved right now,” says Bhawani Rana, former president of the Federation of Nepalese Chamber of Commerce and Industry (FNCCI) and an industrialist.

After taking office as Finance Minister in the government formed following the Gen Z protest on September 16, Rameshore Khanal visited Thapathali, Tinkune, and Koteshwar to observe the damage to commercial establishments during the movement. In Koteshwar, he met and encouraged Min Bahadur Gurung, the operator of Bhatbhateni Supermarket. Gurung also stated that the minister’s encouragement inspired him to strengthen his resolve and move forward. Bhatbhateni is one of the private sector establishments that suffered the largest losses during the Gen Z protest. During the movement, the Hilton Hotel and Hyatt Hotel in Kathmandu were burned down. Consequently, these hotels have been closed indefinitely.

According to private sector institutions, the private sector has suffered damages worth approximately Rs 80 billion due to the vandalism, arson, and looting during the Gen-Z protest.

Finance Minister Khanal, who says he is familiar with the problems of the private sector, has been trying to win their trust since the initial days. On October 6, Chandra Prasad Dhakal, President of the FNCCI; Birendra Raj Pandey, President of the Confederation of Nepalese Industries (CNI); and Kamlesh Kumar Agrawal, President of the Nepal Chamber of Commerce (NCC), met collectively with Finance Minister Khanal. In the meeting, representatives of all three institutions praised the efforts being made by Finance Minister Khanal.

To boost the morale of the private sector, the government had announced programs for revenue exemption, banking concessions, and facilitation in insurance for reconstruction. The Ministry of Finance abolished the ‘Reference Price’ and implemented an online database system for customs. This was a long-standing demand of industrialists and businessmen. In consultation with the Ministry of Finance, the central bank also introduced a relief package for industrialists and businessmen.

After taking office as Finance Minister in the government formed following the Gen Z protest on September 16, Rameshore Khanal visited Thapathali, Tinkune, and Koteshwar to observe the damage to commercial establishments during the movement. In Koteshwar, he met and encouraged Min Bahadur Gurung, the operator of Bhatbhateni Supermarket.

It is analyzed that Nepal’s long-stagnant economy will decline further after the movement. Indeed, even before the movement, the country’s industries were operating at much less than their installed capacity. The demand for loans in banks could not increase due to the lack of investment in new projects. Industrialists were cutting production, citing decreased market demand.

Furthermore, there are public assessments that the country’s economic growth will be affected due to the damage caused by the movement and the decline in private sector morale. The World Bank has projected Nepal’s economic growth to be limited to 2.1 percent. Economist and former member of the National Planning Commission Chandra Mani Adhikari states that if the government cuts expenditure and the election is not held on the announced date, economic growth could become negative.

Industries closed, thousands unemployed

While Finance Minister Khanal, who has a close understanding of the country’s economic situation, was working in a private-sector-friendly manner, the Ministry of Energy brought the dispute over the Dedicated and Trunk Line tariff arrears to the surface. The dispute over the electricity tariff used during the period of load-shedding has been lingering between the Nepal Electricity Authority (NEA) and the industrialists for a decade.

When Ghising was the Executive Director of the NEA, he insisted on collecting the arrears from industrialists. The businessmen, however, have refused to pay the tariff, claiming that the NEA never issued the bill. Following this and other misunderstandings, the then government led by Prime Minister KP Sharma Oli dismissed Ghising last March, four months before the end of his term.

Following the Gen Z movement, the same Ghising took charge as Minister for Energy, Water Resources, and Irrigation, as well as Urban Development and Physical Infrastructure and Transport. Immediately after assuming office, his first decision was to collect the outstanding Dedicated and Trunk Line tariffs. In the process of implementing his decision, the NEA gave industrialists a deadline to pay the arrears by October 19. However, the industrialists did not pay the arrears.

On October 17, at least 26 businessmen wrote a letter to Prime Minister Sushila Karki demanding proof of electricity consumption. “Our demand is not for a tariff exemption. We are ready to pay the full amount of the liability if provided with proof that electricity was supplied for the operation of the industries,” the letter signed by 26 industrialists and sent to the Prime Minister stated.

Without responding to the industrialists’ letter, the NEA has cut the electricity lines of 26 industries from October 21 to date. As a result of the lack of electricity supply, industries are rapidly shutting down, and their employees have been given indefinite leave.

The country’s largest, Reliance Spinning Mills, located in Itahari Sub-Metropolitan City, Sunsari, has been closed after the electricity supply was cut. The industry has laid off approximately four thousand employees. According to the NEA, Reliance has an outstanding tariff payment of Rs 753.6 million. Similarly, the Shivam, Ghorahi, and Sonapur Cement industries have also been closed. Around 1,200 employees have become jobless due to the closure of these industries.

Almost all industries of the Panchakanya Group have been shut down. Dambar Sahu, a director of the Group, stated that the industry informed the employees that they would not be able to pay salaries if the industries remained closed for a long time after sending them on leave. Approximately 2,200 people are employed in the industry.

On October 17, at least 26 businessmen wrote a letter to Prime Minister Sushila Karki demanding proof of electricity consumption.

‘This is not the right time’

Representatives of the private sector and economists have stated that even if the Dedicated and Trunk Line electricity tariff, which has been in dispute for a decade, must be collected, now is not the appropriate time for it. The representative body of industrialists, the CNI, has urged for the resolution of the dispute through dialogue. “At a time when the country’s economy is in a challenging state and productive industries are barely managing to operate by producing goods at low capacity, the NEA’s action of cutting electricity lines in some industries is causing further hardship to those industries and affecting the workers as well. The CNI sincerely urges the industrialists and the government to immediately engage in talks and dialogue to resolve the dispute,” the statement issued by the CNI said.

Bhawani Rana, former president of the FNCCI, states that while the Ministry of Finance is attempting to win the trust of the private sector, the role of Energy Minister Ghising and the NEA has alienated the entire private sector. “Investors are currently holding off on their plans. Business morale is low,” says Rana. “There should have been discussions with the industrialists, and alternatives should have been presented. Right now, there appears to be a lack of coordination even among the government ministers.”

Pashupati Murarka, former president of the FNCCI and an industrialist, says that there is a visible conflict rather than coordination between the Ministries of Energy and Finance. “The current government was formed on an agenda of good governance. However, the rights of the industrialists have been taken away by abolishing the provision for administrative review regarding the electricity tariff issue,” says Murarka. “The Energy Minister is acting like the Executive Director of the NEA. It seems like he is trying to complete the work he couldn’t do before.”

Economist Pushpa Sharma also states that now is not the time to discourage industrialists. “Shutting down industries in the name of collecting arrears does not benefit anyone. It is the private sector that drives the economy and creates employment,” says Sharma. “Arrears must be collected, but now is not the appropriate time for it.”

Sharma suggests that this dispute should not be limited only to the Ministry of Energy but should also involve the Ministries of Industry and Finance to find a solution through discussion. “There must have been an agreement when electricity was supplied. The agreement must also include how to resolve disputes when they arise. Even if there is no such provision, opportunities for administrative appeal or going to court must be given within the state mechanism. After that, those who still don’t pay can be punished,” he concludes.