Publicly-listed Nepal Bitumen and Barrel Industry is one such firm. The company - of which 65 percent stake was acquired by Panchakanya Group in 1994 - for instance, has recently sold 2 bighas of land to its subsidiary.[break]
Panchakanya had bought the company, spread across five bighas, for Rs 13.12 million. At that time the group had paid Rs 2,500 for each kattha of land. But now the company sold the land at Rs 700,000 per kattha.
“They did this without informing us and the practice goes directly against the government´s intention of privatizing the industry,” an official of the Ministry of Finance said on condition of anonymity. “Our sole objective of selling shares in the company was to keep the unit running and not let the company benefit from the rise in realty prices.”
Now, the ministry is in dilemma over its next move as the agreement signed with the company during the time of privatization does not include any clause to bar the company from selling the land.
Surprisingly, the government does not allow private or public companies to sell assets of state-owned companies even after their acquisition. Such a clause, however, is not mentioned in the Privatization Act. “But the act also does not mention anything on sales of assets of privatized firms,” the official said, arguing, “The intention of privatizing a company is not to let companies benefit from real estate price hikes”.
In fact, problems like the one created by Nepal Bitumen and Barrel Industry would have been easier to settle had the government come up with a privatization regulation - clearly mentioning asset management conditions - soon after enforcing the Privatization Act in 1994.
Because of absence of such law, Bhrikuti Paper and Pulp Ltd had also made attempts to sell land plots of the country´s largest paper mill. The factory, which was bought by Golchha Organization for Rs 229.8 million, was privatized in 1992.
“At current market price, the land under the control of the paper factory can fetch up to Rs 10 billion,” the official said.
Because of this reason the finance ministry did not allow Golchhas to sell the land. The case is now in the court.
The government had to face similar problems after privatizing Agricultural Tools Factory. Upon its liquidation in 2003, its new owners started selling equipment without injecting fresh capital into the unit to bring it into operation.
“We (the government) then acquired the company back,” the official said. But since the new owners were unhappy with this decision, they dragged the government to the court. Since then the government is fighting a legal battle.
The official said: “If we had a proper regulation on asset management following privatization of state-owned enterprises, we wouldn´t have faced such problems.”
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