Nearly Rs 47 Billion in Govt Investment in Public Enterprises Unaccounted For

Nearly Rs 47 billion in government investment in public enterprises has been found to be unaccounted for.

According to the Ministry of Finance and the Public Debt Management Office (PDMO), details of loans and equity investments have not been verified by the enterprises’ ledgers for years. The records held by the government and the institutions do not match. There are no clear answers on where these investments went or how they were misreported.

The PDMO said equity investment worth Rs 26.34 billion and loan investment worth Rs 20.53 billion — a combined Rs 46.87 billion — remain unreconciled. The government insists it invested more. But, the institutions claim the figures are lower. No one has taken responsibility for the discrepancies, some of which date back decades.

The government has invested in public enterprises to operate major infrastructure projects, including hydropower, airports, telecommunications and drinking water.

But weak internal controls and the absence of unified accounting standards have made it impossible to determine the actual value of government loans and equity.

To address longstanding issues, the government introduced the “Share and Loan Investment Policy, 2081.” Yet the problems persist for investments made before the policy took effect.

Vague legal guidance and ad hoc government decisions on repayment schedules, interest rates and service charges have kept nearly Rs 47 billion in investments unresolved.

Large accounting gaps remain in the records of bodies such as the Civil Aviation Authority of Nepal, the Nepal Electricity Authority and Nepal Airlines Corporation.

According to the PDMO, there is still no clear record of how much investment went into the Nepal Electricity Authority’s rural electrification programmes. A Cabinet decision on December 27, 2011, instructed that foreign grants received for the programmes be treated as equity investment. Another Cabinet decision on May 23, 2017, directed that rural electrification funding be counted as equity rather than loans. But there are no verified records showing which programmes received how much, or which parts were financed through foreign grants.

A similar mismatch exists in the valuation of assets transferred to the Civil Aviation Authority of Nepal when it was established. The figures held by the Authority and the PDMO do not align.

Responding to Rastriya Samachar Samiti (RSS), the state-owned news agency, the Nepal Electricity Authority acknowledged procedural lapses.
It said periodic reconciliation is ongoing.

“The Authority has recently undergone restructuring. But the government has kept separate accounting entries for those changes. Some decisions were implemented immediately by us, while the Public Debt Management Office delayed its processing, which may have caused problems,” it said. “Reconciliation work is underway. Some matters require Cabinet-level decisions.”

Differences in interest rates on loans and repeated changes to repayment schedules have created further problems.

The government borrows from development partners and on-lends the same funds to institutions under subsidiary loan agreements.

Though the government pays principal and interest on time, the institutions do not. They request revised repayment schedules, often citing construction delays. 

The PDMO said delays in completing projects require amendments to existing loan agreements, prompting frequent correspondence between government bodies.

“The government must, without exception, repay principal and interest to international development partners as per the original loan agreements. But due to procedural ambiguity on revising the repayment schedules, changes have become complicated,” states the government’s “Annual Report on Share and Loan Investment, Fiscal Year 2024/25.”

The report also highlights gaps in accounting for loan amounts disbursed directly by development partners to institutions.

There is no legal clarity on actions to be taken when such investments remain unpaid. Promissory notes state that assets can be sold to recover dues. But, the PDMO argues this is not feasible in practice.

There is also no proper record of government guarantees provided to institutions. The PDMO does not have complete data on guarantees or approvals for loans taken from banks and financial institutions. It was not even notified about the government-approved short-term borrowing by the Nepal Electricity Authority.

Since the transfer of loan-related records from the Office of the Auditor General six years ago (in 2076 BS), the PDMO has repeatedly asked for a task force to examine the discrepancies. It has called for the involvement of the concerned institutions, relevant ministries, the Auditor General and the PDMO itself.

The Office said confusion persists because the institution taking the loan is often different from the one spending the funds. In the Kathmandu Valley Water Supply system, for example, it remains unclear whether the Board, Kathmandu Upatyaka Khanepani Limited or the Project Implementation Directorate maintained the official records. The government signed a subsidiary loan agreement with the Board. The Board disbursed funds to Kathmandu Upatyaka Khanepani Limited and the Directorate.

“The entity taking the loan does not lay the pipes. The entity laying the pipes does not distribute water. The entity distributing water and earning revenue does not hold the responsibility for loan repayment,” the Office’s report states.

Santosh Baral, Information Officer at the Kathmandu Valley Water Supply Management Board, said discrepancies emerged because grants were included as loans. “For many projects, 50 to 80 percent of the funding came as grants. But the Office did not distinguish between the two in its accounting. The Auditor General had raised this earlier. We have now clarified this and informed the Office,” he said.

Mohan Singh Basnet, Information Officer at the PDMO, said institutions are repeatedly reminded to reconcile accounts. “The primary responsibility lies with the concerned ministries and the institutions themselves. We continuously ask them to reconcile. Until the accounts are settled, our records remain the official ones,” he told RSS.

The Office held discussions with the Water Supply Institution on December 24 and with the Civil Aviation Authority on December 25. Both have been instructed to reconcile accounts by mid-December 2025.

According to the “Annual Report on Share and Loan Investment, Fiscal Year 2024/25,” the government has invested Rs 930.88 billion in 159 institutions as equity and loans. Equity investment in 116 institutions stands at Rs 404.81 billion. Total loan investment has reached Rs 526.06 billion, including Rs 158.18 billion from internal sources and Rs 367.88 billion from external sources.

Despite this scale of investment, returns remain weak. Many institutions have failed to pay principal or interest on time, adding to government liabilities. “By Fiscal Year 2024/25, overdue principal stood at Rs 259.19 billion and overdue interest at Rs 140.88 billion. Total overdue amounts reached Rs 408.20 billion,” the report states.

Audit performance is also poor. Only 21 institutions completed regular final audits by Fiscal Year 2023/24. Udayapur Cement, Public Service Broadcasting Nepal and Gorkhapatra Corporation have audited only up to Fiscal Year 2021/22. Janakpur Cigarette Factory and Rastriya Beema Company Limited have audited only up to Fiscal Year 2019/20. Bishalbazar Company Limited has not audited beyond 2018/19. Rastriya Jeevan Beema Company Limited has not updated audits beyond 2016/17. Nepal Orind Magnesite Pvt Ltd has not audited beyond 2007/08.

“Some overdue principal and interest could not be calculated due to missing promissory notes, decisions and agreements. Only the principal has been included in such cases. The overdue revenue is not reflected in the financial statements,” the PDMO states in its annual report.

RSS