My Republica, June 14, 2019
Poor financial performance of PEs denies govt return despite increase in investment
KATHMANDU, June 14: Only seven out of 37 public enterprises (PEs) currently in operation have been able to offer dividend to the government in last fiscal year 2017/18.
According to the latest figures released by Office of the Auditor General in its annual audit report, these seven enterprises, who made profit from their businesses, paid the government a total of Rs 9.89 billion in cash dividend in the last fiscal year.
The annual return that the government has reaped from its investments in these enterprises is 27.23 percent higher than the previous fiscal year 2016/17 when it received dividend Rs 7.78 billion in total dividends.
Not a single government-owned company in manufacturing sector has provided dividend to the in last five years, indicating that that the investment in the sector has not become financially profitable.
Nepal Doorsanchar Company Ltd provided the highest dividend to the government in the last fiscal year. According to the report, the telecommunication company, which is 92 percent government-owned, paid Rs 7.55 billion as dividend to the government. Next on the list was Civil Aviation Authority of Nepal (CAAN) with Rs 1.64 billion dividend payout to the government.The CAAN is not only a regulatory body for the aviation sector in the country, but also the air navigation service provider and airport operator.
Other companies providing dividend to the government in FY2017/18 are Industrial Districts Management Ltd (Rs 7.5 million), Agricultural Development Bank Ltd (Rs 364 million), Nepal Stock Exchange Ltd (Rs 88 million), Citizens Investment Trust (Rs 1.6 million) and Hydroelectricity Investment and Development Company Ltd (Rs 2.5 million).
As there are only few public enterprises that are making profit, the government has not been able to reap much dividend from its investments on them. The government's investments in public enterprises have been on the rise in past five years. According to the data, the government injected Rs 364.79 billion in both equity and loans in public enterprises in FY2017/18, up from 16.89 percent in the previous fiscal year.
According to the report, only 27 enterprises earned net profit in the last fiscal year. They earned Rs 44.99 billion in net profit during the year, up from Rs 41.43 billion a year earlier. Even Nepal Oil Corporation and Nepal Electricity Authority—two enterprises which has been on losses for years—earned net profit in the last fiscal year.
Remaining 10 public PEs reported combined net loss of Rs 642 million in the last fiscal year, according to the report.All public enterprises in social sector are in red for last five years while all those from service sectors and financial sectors are making profit.
Many attribute weak corporate governance, excess political interference, mismanagement, and lack of autonomy to poor financial performance of the PEs.
“There is a need for structural and managerial reforms in PEs to get returns from them and ensure better service delivery,” Minister for Finance Yuba Raj Khatiwada wrote in the preface of the Yellow Book -- an annual publication of the Ministry of Finance that reviews the situation of public enterprises.