Industrial capacity utilisation in Gandaki Province, a region primarily dominated by small and medium-sized enterprises (SMEs), saw a notable decline in the last fiscal year, 2023/24.
According to the Economic Activity Study Annual Report 2023/24, published by the Nepal Rastra Bank’s Gandaki Province Office, the average capacity utilisation of industries in the province dropped to 39.2 percent. This marks a decrease of 3.2 percentage points compared to the previous fiscal year, 2022/23.
Despite the decline in the overall industrial capacity utilisation, some industries showed positive trends surpassing 50 percent utilisation, says the report prepared by studying 14 types of industries in the region.
The biscuit and beer industries led the province in capacity utilisation, recording 69.49 percent and 57.54 percent, respectively. Other industries that exceeded 50 percent capacity utilisation included those producing mustard oil and liquid medicine.
Sector wise, only four industries – cigarettes (49.63 percent), chocolate (49.06 percent), cement (45.63 percent), and bricks (41.02 percent) – had capacity utilisation rates between 40 and 50 percent.
According to the report, cement production increased by 12.10 percent in the review period, rising from 1.02 million tonnes to 1.14 million tonnes.
Other industries which saw growth in production included ointment medicine (11.07 percent), biscuits (10.65 percent), processed milk (4.81 percent), oilseed oil (3.11 percent), and cigarettes (2.32 percent).
On the contrary, brick production dropped by 36.46 percent, chocolate by 34.20 percent, noodles by 25.95 percent, and dry syrup medicine by 18.73 percent.
While beer production fell by 9.93 percent, production of tablet medicine dropped by 8.63 percent, liquid medicine by 7.84 percent, and capsule medicine by 3.65 percent.
Gokarna Karki, President of the Pokhara Chamber of Commerce and Industry, claimed the primary reason for the decline in capacity utilisation was the decrease in consumers’ purchasing power, leading to a drop in demand.
"Consumers have limited their purchases to essential goods," Karki said. "This has resulted in a contraction of economic activities. Industries cannot increase production amid demand crunch.”
Karki further added that reduction in agricultural production resulted in better capacity utilisation of the biscuit and beer industries. “Biscuit consumption is on the rise since they are easily available.”
The report also notes several challenges to operating industries at full capacity. It includes the availability of electricity, raw materials, appropriate markets for domestic products, and other physical infrastructure. Additionally, it points out the lack of skilled and trained human resources, outmigration of workforce, and expensive plots of lands as major obstacles.
The report has stressed the potential of initiatives such as the Gandaki Economic Triangle Project, "Make in Nepal," and "Made in Nepal" campaigns included in the budget for the current fiscal year.
By the end of last fiscal year, the report says that the total number of registered industries in Gandaki Province has reached 73,766 while the number of commercial firms stands at 74,319.
