Govt Prepares to Privatise NIDC

Kathmandu, Oct 16-As per the announcement made in the budget, the government is set to appoint an independent valuator for evaluating the property and liabilities of Nepal Industrial Development Corporation (NIDC) for an early privatisation of the financially-crippled public enterprise.

“The government has already consented to appoint an independent valuator for the valuation of assets, properties and liabilities of NIDC,” said a senior official at the privatisation cell of the ministry of finance. He cited NIDC’s failure to make promised progresses in recent time as one of the main reasons for privatising it.

A meeting of the privatisation cell next week will appoint the valuator, the official told The Himalayan Times Reports . The valuator will be given 60 days time to valuate all the fixed, core and portfolio assets as well as liabilities of the ailing state-owned public enterprise, he added.

The official also said that MoF has already received a couple of proposals from independent financial consulting firms to be the valuator. “The valuator’s report will pave the path for early privatisation,” he said. Earlier the government had decided to liquidate the corporation following a diagnostic study report by PriceWaterHouseCoopers Ltd that pointed out that the state owned enterprise is ‘virtually bankrupt’.
However, protests by NIDC employees and shareholders made the government to alter its decision and go for privatisation. Accordingly to finance minister Madhukar SJB Rana’s budget speech, the government is supposed to have privatised the NIDC within the current fiscal year 2005-06.

The PriceWaterHouseCoopers report had found that NIDC is ‘technically insolvent’ with an alarming 98 per cent non-performing loans. Findings of the study, which was carried out with financial assistance from the Asian Development Bank under the Financial Sector Reform Programme, came under fire from both NIDC employees and public shareholders. Later the government had to alter its decision of liquidation and opt the privatisation.

The employees have flayed the recommendations in the report as contradictory and ironical, as it had suggested Rs 300 million for smooth resumption of NIDC with reform measures, whereas liquidation cost was put at an additional Rs 610 million. Established in 1959, NIDC is a state-owned industrial development bank, wherein the government holds 83.14 per cent of shares. It has made investments in more than 150 different industries throughout the country and its total loans and advances stand at Rs 5.725 billion as of the fiscal year 2001-02. The total loss of the corporation had crossed Rs 991.10 million in 2002, with a cash loss of Rs 189.76 million. The loans yet to be collected by the corporation amounts to Rs 2.15 billion. NIDC has fixed assets worth over Rs 6 billion including core asset of Rs 2.25 billion and portfolio assets of Rs 4 billion and liabilities worth Rs 1.84 billion. The authorised capital of NIDC is one billion and paid-up capital is Rs 415.8 million, as per the record.

Over politicisation during the appointment of the board of directors, bad governance and poor credit risk assessment are some of the reasons that almost every public enterprise is facing a fate akin to NIDC in the country.