The government has formed a talks team to negotiate with industrialists about collecting rent for industrial areas at the rate set six years ago. This decision comes after industrialists repeatedly ignored the government’s requests to pay rent and instead demanded various exemptions.
After the Patan High Court dismissed a case filed by the industrialists over the rental dispute on February 18, 2024, and ordered the implementation of the revised rates set on July 17, 2018 by the Industrial District Management Limited (IDML), the state-owned company that manaes Industrial Districts in Nepal has now begun preparations to enforce these rates. Industrialists had earlier contested the rate increase, arguing that it was neither fair nor scientifically justified. According to the company, the total arrears owed by the industrialists up to the end of Fiscal Year 2023/24, based on the revised rates, amounted to Rs 680 million. Information Officer of IDML Krishna Bahadur Pun stated that with the decision to apply these rates to the current fiscal year (2024/25), the arrears have now increased to Rs 800 million.
Since the arrears must be paid in accordance with the court’s ruling, the IDML has initiated negotiations to resolve the issue. The discussions aim to offer installment options, waive late fees, and provide discounts, as the industrialists are unable to pay the full amount at once.
"The government formed a negotiation team in late September to settle the outstanding dues," said Pun.
The negotiation team is led by Sita Niraula, under-secretary of the Ministry of Industry, Commerce, and Supplies, with members including an under-secretary from the Ministry of Finance, as well as the general manager and other officers from the IDML.
Ramhira Pathak, president of the Federation of Industries in Nepal Industrial Estate, stated that the federation would form its own negotiation team by Tuesday. He added that Ejaz Alam, the senior vice president of the federation, would serve as the coordinator of their team. The IDML is expected to provide further information on the matter by Tuesday.
After receiving the full text of the Patan High Court’s verdict, the IDML’s board of directors decided to collect the arrears based on the rates set on July 17, 2018. Letters were sent to all 10 industrial district management offices instructing them to implement the decision and collect arrears from the industrialists according to the revised rates.
The 10 industrial zones—Balaju, Patan, Bhaktapur, Hetauda, Dharan, Nepalgunj, Pokhara, Butwal, Birendranagar, and Rajbiraj—each have their own Association of Industrial Districts. These associations are collectively represented by the Federation of Nepal Industrial Estate Industries.
The industrialists filed a case in the Patan High Court on July 16, 2023, seeking to annual the revised rates.
The Industrial District Operation and Management (Fourth Amendment, 2074) Regulations, 2071 mandate that rent for land and buildings in industrial areas be reviewed every five years. However, rents for non-productive industries can be revised sooner. Based on this provision, the IDML introduced new rates, significantly increasing rents. The decision met resistance from industrialists, who argued that the hike was unjustified and against the interests of industrialists.
Pun previously revealed that after initial protests, the then-Minister for Industry instructed the IDML to delay implementing the new rates. Consequently, the IDML’s board decided to postpone collecting the increased rent. Study task forces had also suggested granting the IDML board the authority to determine rental rates.
Four years after the initial decision to raise the rent, the IDML’s board of directors, in a meeting on January 15, 2023, concluded that the original decision should be implemented. As a result, new bills were issued to industrialists, prompting further opposition from the federation.
The IDML has classified industries within the zones as either productive or non-productive, with both categories experiencing rent increase. However, factory buildings, warehouses, and residential units within the zones have not seen rent hikes.
For productive industries, the annual rent in the Balaju Industrial Area is now Rs 81,000 per ropani, compared to Rs 12,520 per ropani in 2015.
For non-productive industries, the rent structure has been divided into three groups, with similar rates in all 10 industrial zones. The new rates represent a significant increase from the 2015 levels. In the Balaju Industrial Area, the group-wise rent was initially set at Rs 30,000 for Group 1, Rs 40,000 for Group 2, and Rs 100,000 for Group 3. According to the revised rate, the rent is Rs 120,000 for Group 1, Rs 180,000 for Group 2, and Rs 300,000 for Group 3 at present.