Home Business Industrial closures leave behind unemployment, unpaid bank loans

Industrial closures leave behind unemployment, unpaid bank loans


factoryBIRATNAGAR, MAR 17 – Life has been harder for Khadga Bahadur Gurung of Biratnagar after he and his family members lost their jobs when the factories they were working in were shut down.

Till a decade ago, Gurung, his wife Kamal and son Rajesh were all employed in the factories operating in the Mills Area of the industrial city, and life was good. “We used to have meat thrice a week, but now it is very difficult to run the household,” he said.

Similar is the state of the family of another local resident Manohar Bana. Once, Bana’s entire family including Krishna, Amar, Usha and Dibya were employed in the factories in the Mills Area, but now all of them have lost their jobs. “People in the entire settlement were living a happy life when the factories were operating here,” he said. “Following their closure, life has been harder for all of them.”

Almost all the factories operating in the area have now closed. Until a decade ago, there were one and a half dozen companies in the Mills Area. However, only two factories, Biratnagar Jute Mill and Raghupati Jute Mill, are operating currently but at reduced capacity. Morang Sugar Mill, Shaha Industry, Juddha Match Factory, Hulas Metal, Ashok Textile Industry, Ganapati Cotton Mill, Hanuman Jute Press, Himalaya Rice Mill, Arun Udaya Steel Industry, Guheshwori Rice and Yamaha Motor Company are among the factories closed.

The Maoist conflict, break down in law and order and the trend of some industrialists to take loans from banks without any intention of repaying them resulted in the closure of many factories. More than 20,000 people were employed in these factories, with around 15,000 of them working in the Mills Area alone. All of them have now become unemployed. One to five members of a single family in the Mills Area were employed during the time when local industry was booming.

Tilak Bhujel, who has worked for 36 years in Biratnagar Jute Mill, said, “Settlements in the entire Mills Area were looking br-ight, but running a home has been tougher now for the people here.”

Those who lost jobs following the closure of the factories here have gone to India to find work. With the people unemployed, quarrels at home have become routine. According to local Manoj Khadka, many who lost jobs have been involved in wrongful deeds.

With the youths in the family becoming drugs addicts due to the loss of their jobs, families here are facing further hardships. Khadka said that the locality was called Mills Area due to the existence of many factories, but after their closure, it has become a neighbourhood of drug addicts.

The closure of the factories has not only resulted in unemployment but also a drop in the industrial sector’s contribution to the Gross Domestic Product (GDP). The contribution of the manufacturing sector to the GDP was 8.5 percent in the fiscal year 2000-01. It plunged to 6.2 percent in the last fiscal year. Finance Minister Ram Sharan Mahat said at a programme in Kathmandu on Saturday that the country was in fact headed towards de-industrialization since an upsurge in the sector in the early 1990s.

The industrial closures in the Mills Area have not only affected the workers but also the banks who have sunk millions in these factories. The banks which have been left with hefty unpaid loans have been selling off the machinery and equipment belonging to the borrowers at nominal prices.

After the promoters of Ashok Textiles fled to India, Nepal SBI Bank was able to recover Rs 9.1 million only. It had issued credit worth Rs 60 million to this garment factory against its machinery as collateral. This same factory had taken another loan of Rs 100 million from Rastriya Banijya Bank putting up its land and factory building as collateral. RBB is now planning to recover its investment by selling off the land.

The story is similar at the Sunsari-Morang Industrial Corridor where three dozen factories have been closed in the last one decade. Banks with huge loan exposure in these factories have been forced to sell off the collateral to recover their investments. The banks said they had issued loans of more than Rs 4 billion to these companies.

NIC Asia Bank has recovered less than 50 percent of the principal of its loan given to Om Jagadamba Textiles. The promoters of this garment factory had borrowed Rs 50 million by putting up their machinery as collateral.

RBB has also recovered its investments in seven factories belonging to the Mangaturam Group. It has issued loans of Rs 700 million to this group that used to manufacture soap, biscuit, vegetable ghee and other products. RBB sold off the land, machinery and buildings to recover its investment. However, in the case of Ganapati Cotton Industries, the machinery that it had put up as collateral has vanished. Ganapati is yet to clear loans worth Rs 400 million to Nepal Bank Limited and RBB. Officials of both the banks said that there was no alternative to selling off the land to recover their money.


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