Should the Government Run It or Lease It to the Private Sector?
August 13, Biratnagar – Old structures covered with trees and shrubs outside; machines inside shrouded with cloths and jugs, cobwebs and the smell of dew. Surrounded by garbage and stagnant water, with tattered sacks left on the machinery and neglected motors abandoned after quail extraction. This is the current state of Nepal’s first industry, Biratnagar Jute Mills. Once a source of employment for 8,000 people, the mill still bears slogans written in white letters on its red walls: “Increase production, save the mill, reduce wastage, prevent losses.” However, no production has continued for years, and the mill is essentially defunct. Many walls are cracked, the southwest wall has collapsed, rain leaks through the roof, and many important parts have been lost.
Established in 1936 (1993 BS), the Jute Mills has been closed for several years. The government has formed a study committee to explore restarting operations, which has rekindled hope for revival. However, poor physical infrastructure, outdated machinery, and a competitive market pose significant challenges for resumption. Discussions are ongoing about whether the government should manage the mill directly or lease it to the private sector.
Former mill operator Phool Kumar Lalwani believes the jute mill can run with a small capital investment. “It is not difficult to operate; the machines there are usable. It is possible to restart the mill with a small investment,” he said, adding, “But it is better for the state to lease it out rather than operate it directly.”
Nandalal Devkota, chairman of the mill’s management committee, asserts that immediate operation of the mill is feasible. He stated that the formation of the government committee has further increased the likelihood. The committee’s preparatory work and government support have made the process easier. He prefers handing responsibility over to the private sector rather than government management. “It would require an investment of 500 to 600 million NPR to operate the mill,” he added. “Instead of running it, the government should facilitate operations and assign a dedicated team. We will proceed according to the committee’s recommendations.”
While the jute production technology has not changed, the old machines can still be used. However, according to industry expert Dharmanand Sanjel, the mill cannot operate using traditional methods. The old machinery cannot produce products that can compete in today’s market. With existing jute mills also facing closures, continuing operations in the old style is not viable. Devkota emphasized that only by adopting modern and technology-friendly production can the mill remain competitive. “Other jute mills are also struggling. Even exports of jute fabric to Bangladesh have ceased,” he explained. “Other jute industries in Biratnagar are currently operating with new technology. If modern techniques are introduced, the industry can survive. Producing new and environmentally friendly jute products is key to the mill’s survival.”
He also highlighted the strategic advantage of proximity to the Indian market, allowing production of jute bags and other materials. “There is ample area, so other industries could also operate here,” Devkota stated.
According to him, not all machinery inside the mill remains intact. Some smaller machines have been stolen, and the larger parts lie in ruins. Some small machinery imported during the last operation attempt were also stolen. Despite the ruin, the bell that signals the shift timing still rings every hour. What was once a three-shift operation employing 8,000 skilled workers now has only nine employees left, including five security guards who take turns ringing the bell. The roof no longer protects against rain, yet the remaining staff harbor a small hope to reopen the mill. Supervisor Manoj Khadka said the structures are strong and repairable to restart operations.
The establishment of Biratnagar Jute Mills spurred the development of the Morang-Sunsari industrial corridor and initiated a wave of industrialization across the country. Alongside Nepal’s industrial revolution, democratic movements also began at this mill. The government operated the industry until the 1990s. Although it was handed over to the Golcha Organization for privatization, it failed to run it. The government closed the industry in 2001 after paying 2,000 employees 550 million NPR. Later in 2012, operational responsibility was given to Bin Some International in Kolkata. Despite a six-month timeline to provide 33 kVA electricity, the company did not receive power for over a year and a half, resulting in a premature termination of the 25-year lease. Under the leadership of Vasant Van as chairman of the management committee, the mill briefly operated in 2018 but closed again shortly after starting twine production. Small machines connected to twine production are now missing and believed stolen from the industrial premises.
Anant Raj Nyaupane, a journalist who has studied the jute mill extensively, notes that the complex structure poses difficulties in restarting operations. “The machines are old, new technology has arrived, so trying to run it the old way is futile,” he remarked. “Although jute bags and related products can be produced, it is inappropriate for the state to operate the mill. The private sector should take responsibility.”