March 5: Industries that are trying to bounce back from the impact of the COVID-19 pandemic have sought for debt recovery law from the government to recover their outstanding dues from the market.
Industrialists have asked for a policy-level decision to include debt recovery provision from the upcoming year’s budget.
With an end to political transition, the flow of investment has increased with expectation of increase in the development activities. But the market size has downsized leading to competition. Industrialists say that the market size has declined because of the weak spending of the government coupled with the impact of COVID-19 pandemic.
Due to heavy competition within the limited market, traders say they are compelled to provide services on credit. Traders have sought for debt recovery law to manage this chaotic market and reduce its long-term impact on economy. Expecting a rise in economic activities, food production sector and construction materials industry have made huge investments. Industries involved in production of cement, rod, and food items such as rice, oil, pulses have received new investment.
“These industries are still receiving new investment,” said Subodh Gupta, president of the Association of Rice, Oil and Pulses Industry. As the market has not increased in proportion to the investment, industries are opting for ways to minimize loss, Gupta said.
“Increase in competition has made industries to extend credit period. In the initial phase, industries were trying to sustain in the market by reducing the market price. Right now, industries are extending the credit period,” said Biswamitra Prasad Kalwar, managing director of Om Food Industry.
Gupta said the Association has been asking for debt recovery law with the government since last year.
“Because of the pandemic, the demand of the essential food items has also gone down which indicates the purchasing power of customers has also gone down,” said Gupta. COVID-19 pandemic has affected progress of development projects as well. The market demand of construction materials has also declined since the government couldn’t make capital expenditure effective.
“Unhealthy competition is on the rise with the decline in demand and increase in investment,” said Rajesh Kyal, an industrialist. “ At normal times, credit transactions are being done for a period of a month which now has increased to more than six months,” Kyal said.
Traders say that if legal provision is introduced limiting credit period for a month, capital can be arranged for another five months. With the arrangement of capital, the production cost can also be reduced, argues Gupta.
“Lack of strict provisions on credit period has invited chaos in the market. If mandatory provision is introduced, it will assist in reducing burden of interest rate along with the production cost,” said Pradip Kediya, former President of Birgunj chapter of the Federation of Nepalese Chambers of Commerce and Industry.