KATHMANDU, July 15: Net profit at state-owned companies dropped 36.7 percent to Rs 6.67 billion last fiscal year, as gains made by companies like Nepal Telecom were offset by losses incurred by Nepal Electricity Authority (NEA) and Nepal Oil Corporation (NOC0, the annual report on public enterprises shows.
The league table included in the annual report released Saturday shows that NEA, the state-owned utility, incurred losses of Rs 6.09 billion in 2010/11, while NOC, the state-owned oil firm, reported a loss of Rs 5.11 billion.
Other firms like Nepal Oriend Magnesite, Janakpur Cigarette Factory and Nepal Drugs Limited also posted huge net losses, of Rs 428.8 million, Rs 218.1 million and Rs 198.9 million respectively, for the year.
The losses made by these companies subsequently weighed down on profits made by public enterprises like Nepal Telecom (NT).
NT, the state-controlled telco, posted a net profit of Rs 12.12 billion last fiscal year. State-owned companies in the financial sector, Agricultural Development Bank, Rastriya Banijya Bank and Rastriya Beema Sansthan, posted net profits of Rs 2.36 billion, Rs 1.76 billion and Rs 1 billion respectively.
In total, 21 public enterprise generated profits, while 14 generated losses and two did not conduct any business transaction in 2010/11.
Although the number of loss making companies in 2010/11 was the same as the previous year, the decline in the number of profit making companies from 22 to 21 indicates deterioration in the financial condition of public enterprises.
While this has had no impact on the amount of dividend that public enterprises shelled out to the government in 2010/11, the report shows only one company extending returns to the government.
Last fiscal year, public-enterprises gave away Rs 5.49 billion in dividends to the government, of which Rs 5.489 billion was contributed by Nepal Telecom.
The only other company that provided returns to the government that year was the Deposit and Credit Guarantee Corporation, which offered Rs 2.6 million.
Because of low participation of firms in extending dividends to the government, the returns on state investments of over Rs 187 billion, including shares and loans, stood at a negligible 5.96 percent, which is lower than the average interest yield of eight percent extended by banks on one-year fixed deposits.
As in the past, government officials point to familiar culprits -- political interference, overstaffing, unproductive human resources, bureaucratic hurdles in the procurement process and slow pace of modernization -- for the failure of state-owned enterprises to become profitable.
But lately, the practice of demanding high remunerations without enhancing productivity has also become a scourge of public enterprises.
“This has raised the incidence of strikes, padlocking of the premises and other untoward activities at public enterprises, which shows that these firms have deviated from their original goal of engaging in the production and distribution of essential goods and services,” the report says.
Although the latest report on public enterprises does not include figures on the number of people employed by them and their average remuneration, the previous fiscal year´s report says that they employed over 33,500 people and on average each staffer was taking home Rs 34,126 per month as remuneration.
Experts say most of the problems faced by public enterprises would be solved if the extra-large workforce is trimmed.
Top 5 profit-making firms
Nepal Telecom - Rs 12.12 billion Agricultural Development Bank - Rs 2.36 billion Rastriya Banijya Bank - Rs 1.76 billion Rastriya Beema Sansthan - Rs 1 billion Civil Aviation Authority - Rs 742.6 million