Kedia Organisation, the oldest and one of the most talked about business conglomerates of the country, has been practicing a synergistic combination of family ownership and professional management since 1909 A.D. Named after their fathers, Late Sundarmal Kedia and Late Ram Kumar Kedia, it was surely a turning point for the Kedias when the first foundation stone of their present day multimillion conglomerate was laid in the form of a small cloth trading business. The group envisions reaching the zenith and being a premium conglomerate through outstanding service performance and clear business vision. Manoj Kedia, Executive Director of Kedia International and Vice president of the Confederation of Nepalese Industries (CNI), talks with New Business Age’s Homnath Gaire and Upashana Neupane on the group’s journey in Nepal so far, role of the private sector in nation’s development and the group’s future plans. Excerpts:
How is the history of Kedia Group different from the general history of Nepal’s private sector?
Trading business in Nepal started along with the Kedia Family. Initially, Kedia family started its business as a cloth merchant with stores in Birgunj and Kathmandu that sold clothes imported from India. With initiation of Late Brij Lal Kedia we gradually expanded our business to food grains trading. It started small but as time progressed it expanded across Nepal.
He used to collect food grains from every corner of the country and supply them to even remote areas that lacked transportation facilities. For the first time in Nepal, he fixed prices of food grains and at a certain point, even the Khadya Sansthan (government owned Nepal Food Corporation) fixed food grain prices by consulting him. Later he established rice mills, dal mills and many more food grain factories. He established Nepal’s first modern rice mill, Bhagwati Rice Mill.
Later Shankar Lal Kedia expanded foothold in the manufacturing sector. He established factories related to steel furniture, stainless steel utensils, textile, umbrella, socks, wheat flour, corrugated steel, copper utensil etc. During that time the steel, textile, and corrugated sheet industries were pioneers in their respective fields in Nepal and they are the backbones of the present day Kedia Organisation.
At the same time we also entered in general merchandising sector by importing goods from third countries and bulk-traded them in local market. Our imports included cloth, electronics, food items, medical equipment, household products, hardware, cement, sugar, and edible oil among others. We also exported rice to Tibet and pulses and lentils to Sri Lanka, Bangladesh and to some European countries.
We established Caltex Company, a petrol pump agent in Nepal, and this is still in operation as Kedia Auto in Birgunj.
Kedia Group also is one of the first industrial houses to advertise its products. We sponsored the “Sundar Sushil Sangeet”, a popular song-on-request programme aired on Radio Nepal, to promote our products.
Amid this long list of successful ventures, we also had some disappointing projects. Though we had bagged the license to launch Coca Cola in Nepal, we had to drop the project in the last minute due to some partnership problems. In 2015 B.S. we had to give up the launch of an iron steel factory project, even though necessary equipment and machinery were imported, after King Mahendra dissolved the democratic government and assumed power. Similarly in 2036-2037 B.S. we had to pull back from establishing the Kedia Paper Industry
What is the present status of Kedia Group and how is it different from the overall situation of the private sector?
Despiteour engagement in diverse sectors, manufacturing sector is our major area. We have established ourselves in the cement, carpet, and the sugar industry. Recently we have started manufacturing PVC carpet and are upgrading production capacity of Indusankhar Sugar Mill, Nepal’s one of the oldest and leading sugar industries.
In the past we invested in the banking and financial sector. We had invested in Siddhartha Insurance, Siddhartha Capital and Siddhartha Bank.
Kedia Group has made some significant investment in the service sector and presently we run several schools and hospitals in the country.
Along with bulk trading, Kedia Group has once invested in housing projects. And as part of its plan to expand its foothold, the group has made small investments in other sectors like hydropower for getting acquainted with them.
How is this conglomerate with interests in so diverse fields being managed and controlled?
We have a joint family and we have divided our tasks within our family members for various sectors. We work in our respective sectors. Our father’s generation is also actively involved in managing the business.
In the recent years, Nepal’s private sector is diverting investments to service and trade sector from the manufacturing sector. What is the reason?
Nepal is a market of its own kind. Situation is difficult here for the manufacturing sector to prosper. Power shortage, a major problem faced by this sector, has been one of the major causes for such decrease in investment in such sectors. Open import is another hindering factor. Nepali market is crowded with cheap products from China and India and it is very hard for domestic products to compete with imported products in the market, especially in terms of cost. As such, only ethnic Nepali products can sustain in the local market.
Lack of skilled and productive manpower, unfriendly labour environment and decrease in agricultural production that has triggered increased imports of agro products, are other factors that are affecting the growth of the manufacturing industries in Nepal.
You are a vice-president of Confederation of Nepalese Industries (CNI) that specializes in the promotion of industries rather than trading. Why is not CNI doing something to put a stopper on the deindustrialization of Nepali economy?
This accusation is wrong. CNI has unwavering vision and mission to achieve. It was established to address private sector’s problems by promoting liberal policies.The organization believes that the country can achieve prosperity via private sector’s involvement in development activities. It has always focused on facilitating the activities of private sector.
In reality, many of the genuine issues and demands raised by CNI for promoting private sector remain unaddressed due to concerned authorities’ reluctance. I am pretty confident that the private sector can make tangible impact if issues and demands raised by CNI are endorsed by the parliament.
You said Kedia Group is also entering the power generation sector. Would you please elaborate on this?
The entire industrial sector has been suffering from power deficit. Industrial sector incurs billions of losses due to it. It is a national problem and it is obvious that major business houses want to engage in the power generation business.
Presently power/energy costs have increased steeply. Simultaneously, demand for power has also increased. Hydropower has high market potential. As we are aware, due to our inability to use our energy resources, we are purchasing energy from neighbouring countries in various forms like petrol, diesel and oil. Most of our financial resources, which we could have invested in productive sectors, are spent in purchasing energy.
Hydropower projects need lots of investment. We need laws and policies friendly enough to attract FDI in that sector. So far, Kedia organisation has not made substantial investment in this sector. We have invested as shareholder in this sector to study the sectoral behaviour.
Why is the Kedia Group not generating power through cogeneration from its sugar mill and supplying it to the national grid?
We can produce 10 Mega Watt of electricity from cogeneration, that too when the country faces maximum power shortage. To produce power, we need huge investment for developing infrastructure. If such infrastructures are developed in all industries across the nation, 30 to 40 Mega Watt of electricity can be produced. It is far less costly than thermal power plants and other alternative means and takes less time to establish also.
However, huge investment is required to develop necessary infrastructure for such a project. As policy keeps changing, it entails huge investment risks. Such risk can be only taken if the state formulates conducive policy and provides special incentives. Otherwise, as an entrepreneur, I would not risk my investment.
Presently, waste from the paper mill remains unexploited. If government supports in setting up power plants, such wastes can be used to generate multifuel whenever the nation needs.
Despite being a major player in agro-processing industry why is the Kedia Group not building backward linkages with the farmers?
We have been coordinating with farmers. We regularly provide them with various skill-based trainings and loans too. We have set up Sugar Mill in Sarlahi district, the major sugarcane growing centre of the country, and it is an instance that reflects how we work in coordination with farmers. In addition to that, we have been actively engaged with farmers in the dairy business as well.
Now that the Constituent Assembly elections are over, how do you visualize the business scenario in the days ahead?
Democracy has to be institutionalised. Political issues have been settled and that marked the crossing of transitional politics. The rhetoric of transition politics should not be repeated and we should be optimistic of economic growth in the days ahead. Kedia Group is very hopeful of contributing to the overall development of the country.
During the last half-decade, there have been many positive changes in the political regime. With the successful completion of second Constituent Assembly election, it’s time to focus on institutionalising the achievements.
Now, political parties should prioritize national interests by brushing aside their partisan and personal interests and focus on formulating collective goals to achieve national economic growth.
It’s an achievement for the private sector that almost all major political parties consider it as the backbone of the national economy. Unity in diversity is our speciality and Nepali leaders should translate this mantra into reality. They should prioritize economic prosperity in their political agenda. Nepali business won’t get good reputation in international market unless our economy is strong and self-reliant. It is possible and all we need is sincere commitment from our politicians.
What agenda would you like the upcoming government to focus on for the progress of business-economic field?
The government should show readiness to address some pending economic agenda. It should create environment whereby industries can be set up in every district. Local bodies should be given authority for deciding utilization of local resources. The central government should act as intermediary to mitigate problems faced by the private sector at the local level.
Above all, state should ensure political stability and strong governance and ensure their commitment made in the last election to the general public of drafting and promulgating the new constitution within the promised time frame. Economic growth of the nation can sustain and progress only if the state and political actors act as strong catalyst and continue propelling it.
The manufacturing index for the last fiscal year and the trade statistics for the first four months of the current fiscal year show some positive indications of improvement over the previous year. How do you interpret this information?
It is too early to comment on this. We do not see any drastic changes in the manufacturing sector over the last fiscal year. There are several reasons for the said improvement of manufacturing index. Firstly there was comparatively better supply of electricity, and secondly political realm remained stable during the last fiscal year. Dollar revaluation also contributed much for the better performance in the exports trade. We had less volume of imports, that is the domestic market imported fewer consignments in the last fiscal year, and this helped show improvement in the growth rate of the trade deficit. But we should remember that the trade deficit is still increasing though in slower rate.
Where do you see Kedia Group of Industries in five years of time?
In five years, we envision our involvement in diverse business. We will be engaging in the infrastructure, tourism, power and in the manufacturing sector. All we need is a strong and stable government, business-friendly policies and fair competition between private sector players. The domestic market has huge potentials and Kedia Group looks forward to tap and invest in them to create more jobs in the domestic market itself.