Industry | Types of Industries | Micro Enterprises | Cottage | Small Scale | Medium Scale | Large Scale
Industry | Industries in Nepal | Manufacturing Industries in Nepal
Industry is the place where goods and services are produced in large scale.
Here, raw materials are converted into work-in-progress and finished goods with the help of labour and machine.
The industry is regarded as the secondary sector of an economy.
The contribution of industrial sector to gross domestic products (GDP) is only around 14% in Nepal.
This shows that the size of the industrial sector is still very small in Nepal.
For rapid economic development of Nepal, the industrial sectors should be promoted.
Industrial sector in Nepal is underdeveloped.
Nepalese industries are in painful condition and their production is in decreasing.
Countries like Japan, the USA, UK, South Korea and Singapore achieved high economic growth through industrial development.
Definition of industry
According to Industrial Policy 2011, “Any economic activity conducted by an individual, firm or company to produce goods or provide service a profit-making objective shall be regarded as an industrial enterprise”
Types of Industries | Types of Manufacturing Industries
There are various types of industries.
On the basis of the investment; they are as follows:
Micro enterprises
Cottage industries
Small scale industries
Medium scale industries
Large scale industries
Micro enterprises
The industrial policy has fixed following enterprises as micro enterprises:
The owner invests the maximum fixed capital Rs 2,00,000 except land and building.
Maximum numbers of workers are 9 including entrepreneur.
The annual turnover of the enterprises should be less than Rs 20,00,000.
The use of power energy should not be more than 10KW.
Industries like cigarette, liquor, tobacco are not included in micro enterprise etc.
Cottage industries | Traditional cottage industries
The industrial policy has fixed following industries as cottage industries:
Cottage industries are related to traditional art and culture.
They are bases on labour intensive; they use special skilled labour, local raw materials and resources.
The use of power energy should not be more than 10KW.
Hand looms, paddle looms, semi-automatic looms, fabric wrapping; dyeing, printing, sewing (except readymade garment) and weaving through traditional technology,
Hand woven Radi, pakhi, carpet, pashmina, and dress based on wool and silk,
Handmade paper and goods based on it Filigree and ornamental items based on traditional crafts,
Traditional sculpture,
Handmade utensils and handicrafts made of copper, brass, dhalot, kaash etc,
Handmade utensils made of iron and items of home use such as knifes, chulesi, sickle and spade and so on,
Handmade ornaments made of gold and silver etc.
Definition of cottage industries
According to Industrial Policy 2011, “Traditional and other cottage industry is an industrial enterprise that uses traditional skills and technology, the instruments and machinery based on local raw materials and associated with art and culture of the country and that uses electric power up to 10 kilowatts.”
Small-scale industries
The industrial policy has fixed following industries as small-scale industries:
Industries other than micro enterprises and cottage industries are small scale industries
The owner invests the maximum fixed capital upto Rs 5,00,00,000.
Natures of such industries are very similar to cottage industries.
Most of these industries are also based labour intensive and use local resources.
Rice mills, furniture industry, cloth weaving, printing etc are the examples of small scale industries in Nepal.
Definition of small-scale industries
According to Industrial Policy 2011, “Small scale industry is an industrial enterprise other than those of micro enterprises and traditional and other cottage industries having the fixed assets of upto 50 million rupees.”
Medium scale industry
The industrial policy has fixed following industries as medium-scale industries:
Industries other than micro enterprises, cottage industries and small scale industries are medium scale industries.
The owner invests the fixed capital from Rs 5,00,00,000 to Rs 15,00,00,000.
Natures of such industries are similar to small scale industries.
Most of these industries use many labors, big machines and equipment.
They use a lot of electricity for producing large quantity of goods.
Tea industries, paper factories, pharmaceuticals, brick industries etc are the examples of medium scale industries in Nepal.
Definition of medium scale industries
According to Industrial Policy 2011, “Medium scale industry is an industrial enterprise having the fixed assets more than fifty million to one hundred fifty million rupees.”
Large scale industry
Large scale industries use inputs at mass level.
These are the extended form of medium scale industries.
Large scale industries give employment to the mass
The owner invests the fixed capital more than Rs 15,00,00,000.
Natures of such industries are similar to medium scale industries.
Most of these industries use many labors, big machines and equipment.
They use a lot of electricity for producing large quantity of goods.
Some examples of large scale industries:
Land and land levelling e.g. land levelling, land make up, walling,
Terrestrial physical infrastructures e.g. drainage, internal roads,
Office, factory building, warehouse, electricity distribution, water distribution system and residential buildings,
Instruments, equipment and tools,
Modes of transport,
Electrical, equipment and office equipment,
Furniture, fixtures and furnishing, communication systems and equipment etc
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Concise History of Industrial Development in Nepal
The history of industrial development started with the establishment of Biratnagar Jute Mill in 1936 (1993 BS) as a industry.
The Nepal Companies Act 1936 provided the incorporation of industrial enterprises on joint stock principle with limited liability.
Biratnagar Jute Mill was established as the first joint venture industry in Nepal.
Biratnagar Jute Mills was a collaborative venture of Indian and Nepalese entrepreneurs.
It was formed in 1936 with initial capital of Rs 160,000 Indian rupees.
During the World War II (1939-45) there were shortages of consumer goods.
Fourteen private companies emerged in mining, electrical generation, paper production and soap production.
They invested small investment as initial capital.
Early industrial ventures experience was bad due to inexperience in the 1930s and 1940s.
In 1942, two paper mills emerged as joint ventures of Nepalese and Indian entrepreneurs.
The end of the World War II had reduced the scarcity of goods and many companies incurred losses.
Industrial growth gained momentum after 1945.
After establishment of democracy in 1951, Nepal entered the modern era.
But the situations of socio-economic infrastructures were very poor.
The pace of industrial development was also very slow at that time.
Until 1951, the Company Act had no provision for private limited companies.
The implementation in the Nepal Company Act in 1951, it made the establishment of private limited companies.
Near about 100 joint stock companies were established between 1952 and 1964.
According to Third Development Plan, there were 459 industries in 1961.
There were 1,330 industries in 1965.
Most of the industries were established in the 1950s and 1970s with government protection.
Nepal’s industrial development was dominated by the establishment of import substituting public enterprises.
The generous aid from Russia, India and China, Nepal’s industrial development was influenced.
Cottage industries like cotton fabric, edible oil production, furniture, soap and textiles were developed.
Modern industries such as jute mills, cigarette factories and cement plants were also developed during that period.
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Importance of Micro Enterprises, Traditional Cottage Industries and Small Scale Industries
Nepal is agricultural country.
There is high unemployment because of seasonal nature of agriculture.
This unemployment problem can be solved by establishing cottage and small scale industries.
Due to the low level of saving, people cannot invest the large amount in industries.
In Nepalese context, cottage and small scale industries are very important in economic development.
The importance of cottage and small scale industries are explained below:
Easy to establish
Cottage and small scale industries are easy to establish.
It can be run on with small amount of capital by using local raw materials and skill.
Such industries can be established and run by the household members.
Employment opportunity
Employment opportunity can be provided in local level.
Agricultural sector provides only seasonal employment and rest of the period, people remain unemployed.
Cottage and small scale industries provide employment during the off season of agricultural and other time also.
Utilisation of local resources
Various types of raw materials are found in different parts of the country.
There are different local raw materials like stone, woods, herbs, bamboos etc in different parts of the country.
They can be used by establishing cottage and small scale industries in rural areas.
Bases of large scale industries
Cottage and small scale industries are the bases for large scale industries.
People learn management techniques and skills from these industries.
These skills help to establish and develop large scale industries.
Preservation of culture
Cottage and small scale industries play an important role in preserving local arts, skills and culture.
The productions of goods from these industries depict (show) local arts, skills and culture of different parts of the country.
Nepalese handicraft goods have become popular in foreign markets.
Source of national income
The products of cottage and small scale industries can be exported to the foreign countries.
It helps to increase the national income.
The government also receives fee charge and tax from cottage and small scale industries.
It increases national income.
Problems of Micro Enterprises, Traditional Cottage Industries and Small Scale Industries
There is favorable condition for the establishment, operation and development of cottage and small scale industries in Nepal. There are high possibilities of expanding variety of production from cottage and small scale industries.
It could help to develop Nepal’s industrial sector.
But, the position of cottage and small scale industries is not satisfactory due to the following problems:
Lack of capital
Most of Nepalese have low level of income; they have small level of saving.
They do not have adequate capital to investment in cottage and small scale industries.
They do not have skill to use these resources.
As a result, the cottage and small scale industries could not be developed.
Lack of raw materials
There are not sufficient raw materials in Nepal for cottage and small scale industries.
Best quality raw materials are exported to foreign countries in large quantities.
Remaining good quality raw materials are used by large scale industries.
Thus, the cottage and small scale industries have to face the shortage of raw materials.
Weak competing power
Cottage and small scale industries use traditional technologies for the production of goods and service.
The quality of production is low and more expensive.
These goods have weak competitive power than the production of large scale industries.
Lack of transportation
Transportation is the most essential to develop industries.
In the absence of sounds transportation system, it is difficult to supply goods from one place to another place.
Limited market
The market for the products of cottage and small scale industries is small, unorganised and unmanaged.
Due to the low quality and high production cost, the products of these industries are unable to compete with foreign products.
Therefore, demand is limited both in national and international market.
Lack of protection policy
Cottage and small scale industries are the foundation of large scale industries.
Due to frequent changing in government policy, these industries do not have any protection or subsidies.
Therefore, these industries are in the stage of death bed, instead of being developed.
Triple tax
There are three types of government in Nepal; they are local level, state level and central level.
The government charges three steps taxes on industries.
These three types of taxes burden are not good for cottage and small scale industries.
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Cost Accounting |
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Cost Reconciliation Statement |
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Medium and Large Scale Industries
The industries which produce the goods in large scale by using the improved technology, efficient manpower and more capital are known as medium and large scale industries.
The contribution of these industries to the total gross domestic products (GDP) is around 14%.
However, the importance of industrial sector for the development of the country is very remarkable.
The importance of medium and large scale industries can be explained below:
Importance of Medium and Large Scale Industries
Provides employment
These types of industries provide large scale of employment opportunity.
It provides opportunity for unskilled, semi-skilled and highly skilled human resources.
It helps to solve the burning problems of unemployment of Nepal.
Modernised agricultural
Industrial development also develops the agricultural sector by producing machine, chemical, fertilizers, irrigation and transportation.
Establishment of agro-based medium and large scale industries would help to increase the agricultural production and productivity.
Development of transportation
The medium and large scale industries help to develop the transportation.
Because these facilities are bases of infrastructure for industrial development.
The modes of transportation are required to transport and distribute the industrial production to different places.
Utilization of natural resources
Nepal is rich in natural resources; these resources are not fully utilised.
Industrial development helps to utilise natural recourses like forest, water, mineral etc.
It helps to economically develop the country by promoting the trade of natural resources.
Development of basic industries
The industries which produce iron, steel, copper and alluminium melting, cement etc are called basic industries.
These industries help to establish other industries.
Thus, the establishment of the large industries helps the development of basic industries.
Improvement in living standard
The employment and income opportunity of the people increases with the establishment and development of industries.
The regular income of the people from these industries helps to raise the living standard of the people.
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Problems of Medium and Large Scale Industries
The major problems of medium and large scale industries are given below:
Less capital
Most of Nepalese have low level of income; so, they have small level of saving.
They do not have adequate capital to investment in medium and large scale industries except initial public offering (IPO).
As a result, the medium and large scale industries could not be developed.
Lack of raw material
Medium and large scale industries require raw materials in large quantity in regular way.
Most of the raw materials are in remote areas and their availability is not at right time.
Therefore, these industries cannot manage raw materials easily which hampers productivity.
Less energy
Medium and large scale industries require the high level of power energy like coal, petrol, diesel, electricity etc.
But these energies are not available in sufficient quantity in regularly.
Due to this reason, these industries are closing down.
Lack of technical knowledge
High levels of technology and skill manpower are essential for establishment and operation of medium and large industries.
But Nepal does not have sufficient technical manpower.
Therefore, foreign experts have to be hired; they are comparatively expensive and are no available when required.
Limited market
The medium and large scale industries produce large quantity of goods.
But the domestic market for Nepalese industrial is very limited.
Peoples prefer imported products rather than local.
The market expansion is very difficult.
Government policy
Stable industrial policy is needed for the industrial development of the country.
But the policy changes frequently due to the unstable government.
The government prefers import rather than production in Nepal.
Investors hesitate to invest huge capital due to unstable and uncertain government policy.
Triple tax
There are three types of government in Nepal; they are local level, state level and central level.
The government charges three steps taxes on industries.
These three types of taxes burden are not good for cottage and small scale industries.
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