The government has introduced standards for contract manufacturing, enabling cement and biscuit industries to enter agreements and initiate production under this framework. Contract manufacturing is a business arrangement where a company outsources the production of its goods to another manufacturer while retaining its brand name.
Although legal provisions for domestic and foreign investors to engage in contract manufacturing were established six years ago, specific guidelines, titled Standards for Contract or Subcontract Manufacturing of Goods 2081, were only introduced this year. Following its implementation, the Department of Industry invited applications for contract manufacturing agreements in mid-September.
In response, several cement companies, including CG-Ambuja, Riddhi Siddhi-Ambe, and Saurya-Ambe, have applied for the registration of their agreements. Similarly, biscuit manufacturers, such as Antarctic Biscuit and Siddhi Binayak Industries, have also submitted applications.
Under the guidelines, industries unable to meet market demand can partner with similar companies to fulfill production needs. For instance, in the cement sector, companies are also exploring "cross-production" agreements, aimed at reducing transportation costs. This involves producing goods at a partner company’s facility, while retaining the original brand name.
An industry source explained, “For example, if a cement company produces goods in Jhapa but faces high demand in Butwal, it can collaborate with a local manufacturer in Butwal to reduce transport costs while maintaining its brand identity.”
According to industry insiders, contract manufacturing not only reduces transportation expenses but also ensures faster delivery and cost efficiency for customers. It also allows companies to avoid additional investment in machinery, thereby reducing operational costs.
The Confederation of Nepalese Industries has hailed the move as a milestone for industrial growth. CNI President Rajesh Agrawal noted, “Contract manufacturing enables small and underutilized industries to operate, creating more jobs and fostering economic growth.”
The practice, common among multinational companies globally, has been partially restricted in Nepal since the implementation of the Industrial Enterprises Act 2076. However, recent amendments, along with the newly introduced standards, have made the process more accessible.
With several companies already applying for registrations, the Department of Industry foresees a rise in domestic and international investment, alongside job creation. The department’s Director General, Rajeshwar Gyawali, stated, “The move will streamline operations and facilitate the formal registration of contract manufacturing agreements.”
The revised laws and clear standards are expected to attract foreign investment and increase Nepal's export potential, particularly in the cement sector, which already supplies products to India. Industry leaders hope this framework will pave the way for further economic opportunities.
