Loss-Making Public Enterprises Spend Billions on Salaries and Perks: Study

Public enterprises operating at heavy losses have been spending billions of rupees annually on salaries and perks for their employees and officials, a recent government study has revealed.

According to the Annual Status Report of Public Enterprises 20282, four institutions—Nepal Airlines Corporation, Nepal Water Supply Corporation, Janak Education Materials Centre, and Public Service Broadcasting Nepal—recorded a combined accumulated net loss of Rs 21.42 billion in Fiscal Year 2023/24.

The Ministry of Finance’s newly published report on harmonising remuneration and service facilities of officials and employees of public bodies states that these four organisations alone spent Rs 3.46 billion on salaries and benefits in Fiscal Year 2024/25. The findings are based on the recommendations of the taskforce formed to propose uniformity in service facilities.

Nepal Airlines Corporation has been incurring the highest net loss, with its financial condition continuing to deteriorate due to loan repayment pressures from aircraft purchases, high administrative expenses, under-utilisation of aircraft, and weak implementation of business plans. Likewise, Nepal Water Supply Corporation, Hetauda Cement Industry, and Public Service Broadcasting Nepal have consistently remained in the red.

The report attributes the weak financial status of these enterprises to various factors, including high tariff arrears and poor coordination in the Water Supply Corporation, low capacity utilisation and high administrative costs in Hetauda Cement, and loss of competitiveness in the changing media landscape for Public Service Broadcasting Nepal. The Dairy Development Corporation is also facing financial distress due to weak marketing, overproduction relative to demand, and overall managerial inefficiency.

The taskforce’s report notes that delays in loan repayment, ineffective implementation of business plans, and rising accumulated losses have increased the financial risks of many public institutions.

It further shows that regulatory bodies, boards, committees, and state-owned institutions—with investments drawn from the state treasury—have been freely distributing facilities to officials and staff. The government had announced in the budget speech for Fiscal Year 2025/26 that it would form a taskforce to ensure uniformity in the facilities provided by state-funded entities.

Accordingly, the Ministry of Finance formed a taskforce, which has recommended ending the existing ad-hoc system and establishing a structured approach to service facilities. The study found that as many as 41 types of allowances were being distributed across various institutions, often without proper assessment. In some cases, the government has had to seek loans or grants merely to pay salaries and perks, the taskforce noted.

There are currently 34,951 employees working in public enterprises alone, in addition to thousands more in boards, committees, and other state-funded entities. Rising administrative expenses and employee benefits have continued to increase the burden on the state treasury, the report stated.

The taskforce examined the details submitted by 60 institutions to assess their salary and benefit structures. It concluded that lack of proper study while determining facilities has created long-term financial liabilities and has further strained public resources.

Former Secretary and former Chairperson of the now-dissolved Public Enterprises Governance Board, Bimal Wagle, said privatisation could be a better option for loss-making enterprises that the government is unable to operate effectively. However, he emphasised that privatisation should not take place without a thorough assessment.

“Before privatisation, it is essential to conduct a detailed study of an institution’s assets, equipment conditions, and the modality under which it should be operated. If privatisation is carried out without proper evaluation, the state may face heavy losses,” he told New Business Age.

He added that in the past, both land and factories were sold off at losses. Even though industries remained closed, the rising value of land benefitted only the business groups that took over the properties, leading to criticism of earlier privatisation attempts.