The views expressed in this paper are the views of the author and do not necessarily reflect the

views or
policies of the Asian Development Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of
Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in
this paper and accepts no responsibility for any consequences of their use. Terminology used may not
necessarily be consistent with ADB official terms.

The Industrial Status of Nepal,Need and Scope of Eco-industrial Clusters: A

Case of Bharatpur Municipality
Narayan Prasad Sapkota
Mayor/Executive Officer , Bharatpur Municipality, Nepal
Email: sapakotan@yahoo.com , sapakotan@gmail.com, bmc@ntc.net.np
In Nepal, The Industrial Policy, 1993 was framed with the objective of accelerating industrial
sector. However, there has been no significant progress in our state of industrial development
even after the passage of a long time of framing of the policy. Industrial development is rapidly
going on all over the world, however, this sector could not have progressed in its expected pace
in Nepal. It is in this backdrop that the new Industrial Policy, 2011 has been formulated with the
objective of bringing positive changes in overall economic and social sectors of the country by
means of rapid industrial development overcoming the weaknesses of the past.
In order to achieve the objectives set by the Industrial Policy, 1993, it was first of all necessary to
transform the economy, which was substantially relied on agriculture, to industrial economy;
therefore, efforts were made to concentrate governmental activities concerning industrial
development towards that direction. The Industrial Enterprises Act, 1993 enacted as directed by
the Industrial Policy, 1993, has created legal basis for development of industries by making
available additional facilities and concessions such as income tax, sales tax and excise to the
prescribed industries of various classes and located in various regions having them classified and
prioritized with a view to moveforward industrial development with high priority. The efforts to
make the industries competitive by making available to them other institutional and basic
infrastructure services were continued. Accordingly, the National Productivity Council was
formed as an institutional arrangement and the concept of Special Economic Zone was put
forward towards infrastructure development.The industrial profile of each district shall be
prepared and private sector shall be encouraged to establish industrial village as per the concept
of one village oneproduct based on the availability of local raw materials and traditional skills.
There are mainly three types of industries viz small scale industries, medium scale industries and
large scale industries. Small Scale industries are an industrial enterprise other than those of micro
Enterprises and traditional and other cottage industries having the fixed assets of up to 50 million
rupees. Medium Scale Industries are an industrial enterprise having the fixed assets more than
fifty million to one hundred fifty million rupees. Large scale Industries are an industrial
enterprise having the fixed assets of more than one hundred fifty million rupees. There is
provision for carrying out Initial Environmental Examination (IEE) or Environmental Impact
Assessment (EIA) as per nature, capacity and level of pollution production. The industry that
does not require IEE/EIA (generally small scale industries), thereof shall have to submit
environment management plan to the agency registering the industry. The latest status of
industries is illustrated in table below:

Table 1:Number of Industries Registered by Category

Number of Industries Registered by Category

(Up to FY 2011/12)
(Rs.mln)
No.of
Industry

Category

Total Project
Cost

Total Fixed Cost

Total No.of
Employment

Agro-Based

217

11,427.00

9,679.28

26,949

Construction

40

6,219.00

5,875.01

2,718

Energy Based

114

183,199.00

176,112.80

14,157

2,207

167,871.00

121,633.80

256,933

Mineral

42

3,743.80

3,303.98

4,624

Service

1,356

88,515.00

63,980.54

89,562

855

38,644.00

34,268.98

34,830

4831

499618.80

414854.39

429773

Manufacturing

Tourism
Total

Table 2: Number of Industries Registerd by Scale

Number of Industries Registered by Scale
(F.Y 2011/12)
(Rs.mln)
Scale
Large

No.of
Industries

Total Project
Cost

Total Fixed Cost

503

370298.66

337321.37

Medium

1155

86786.02

58717.06

Small

3173

42534.33

30762.26

Total

4831

499619.01

426800.69

Till the date there has been 11 Industrial Estate developed in diverse part of the countries.Among
which only 4 has been efficiently functioning viz. Pokhara Industrial Estate, Butwal Industrial
State, Balaju Industrial state and Hetauda Economic Zone.
The main problems of industrial development in Nepal are political instability, industrial
insecurity, unfavourable labour relation, minimal availability of energy, weak industrial
infrastructures, lack of competent human resources, lack of capacity to adopt new technology,
low productivity, lack of diversification of exportable items and weak supply management and
so on. Similarly, lack of the mentality and atmosphere to adopt industrial enterprises as a means

of livelihood is one of the major problems of our industrial development. Our common national
challenges are making investment within the country, optimum utilization of capital and
intellectual property in the production-oriented areas and creating employment opportunities in
the country and creating a reliable industrial atmosphere. As a result, Nepali labour force is
attracted to foreign markets; there is increasing lack of competent human resources from
management level to laborers in Nepal and the available important resources are remained
unused. Therefore, the main challenge in the industry sector in Nepal is to create such an
atmosphere in which investment can be made with certainty in industry sector. In addition to the
above, the challenges such as geographical location of the country, structure of the topography,
worldwide rapidly increasing competitive atmosphere, economic liberalization, impact of
globalization, increasing and changing use of information technology, environmental challenges
have to be taken into account and industrial and commercial processes have to be made simple,
easy, transparent and scientific and there is a need of the day to enhance the role of industries in
overall development of the country. Moreover, diversification of competitive capacity of
exportable items and productivity increment are also the challenges of the industry sector.
Eco-Industry is A community of businesses that cooperate with each other and with the local
community to efficiently share resources (information, materials, water, energy, infrastructure
and natural habitat), leading to economic gains, gains in environmental quality, and equitable
enhancement of human resources for the business and local community.
An industrial system of planned materials and energy exchanges that seeks to minimize
energy and raw materials use, minimizes waste, and builds sustainable economic, ecological
and social relationships. (1996, Presidents Council on Sustainable Development)
With such a huge challenge in industry development, the appeal of Eco-Industrial clusters is not
felt an urgent need however the need of Industrial Clusters was only addressed by Industrial
Policy, 2011.According to the special policy provisions relating to micro enterprises, cottage and
small industries. Industrial clusters shall be developed having established community or
cooperative micro enterprises, cottage and small industries village in order to make available
Business Development Services to the production-oriented industries in rural areas. The latest
policy has the objective to establish industrial entrepreneurship as a sustainable and reliable
sector by utilizing latest technology and environment friendly production process. Apart from it
Technical and financial assistance shall be made available to the industries that use environmentfriendly and energy saving technology on their own costs; and Special measures shall be taken to
promote green industries and to make the established industries pollution free and zero to carbon
emission. This has been addressed by The Thirteenth Year Plan FY 2070/71-2072/73 Approach
Paper.
The Thirteenth Year Plan has given the priority in the construction of industrial infrastructure so
as to attract the domestic as well as foreign private investment in the industrial sector, effectively
use of the existing industrial infrastructure, construction and operation of special economic zones
(SEZ) to emphasize export promotion and reduce poverty through the promotion of micro,
cottage and small industries. In line with the concept of public-private partnership, Nepal
Business Forum has been formed and has started its operation with an objective of resolving
industrial problems. Necessary preparation is going on aiming at supporting sick industries.

Industrial Security Force has been formed with a view to provide permanent security in the
industrial sector. Micro Enterprise Development Program (MEDEP) for poverty alleviation has
been commenced as per the policy of it's extension and internalization. Construction of the
infrastructure of special economic zone at Bhairahawa is in the final stage and initial tasks are
being started in Simara and other 12 places. Works related to construction of link roads and
expansion of power transmission-lines linking to the possible cement industry-sites are being
continued under the Industrial Infrastructure Development Program.
A Case of Bharatpur Municipality:
An Automotive Village : The concept of Automotive village is planned with the joint attempt of
Chitwan Auto Mechanical Business Association and Bharatpur Municipality. There has been
more than 400 auto motive firms registered under Chitwan Auto Mechanical Business
Association. They have proposed to form a cluster of automobiles firms which has features like
Garage, Motor parts and fuel pump, lathe and body factory.
Table 3. Area of land required for Automotive Village
Area of Land Required for Automotive village
FY 2011/12
Type of firms
Motor Garrage
Moter Parts &
Pump
Lathe
Body Factory
Road & Drainage
Building
(Garrage & Small
Scale)
Building(Shutter)
for Motor
Parts,Fuel Pump &
Lathe
Total

Total Number
150
160
50
20
-

Area Required
(Sq.Km)

Remarks

0.0477 (7-10-0) (B-K-D)

0.0203
0.0139
0.0135
0.0068

(3-0-0) (B-K-D)
(2-10-0)(B-K-D)
(2-0-0) (B-K-D)
(1-0-0) (B-K-D)

0.0203 (3-0-0) (B-K-D)

0.0068 (1-0-0) (B-K-D)
0.1294 (20-0-0)(B-K-D)

The proposed area is approx 0.13 sq.km. With the rise in globalization and appeal for EcoIndustrial clusters, some environmental considerations are taken into account. The Thirteenth
Year Plan also stresses on minimising the factors affecting environment and to mitigate the
impacts of climate change, Nepal has adopted the notion of green development. In the
participation of government and national as well as international agencies, efforts are have been
made to frame strategic programs for the national and local adaption, initiation of carbon trade,
and internalization and addressing the environment sensitive cases. Keeping the environment
considerations this automotive village is planned to have applied 3R principle for sustainable
resource recovery which includes Rain water Harvesting system, reduction and recycling of

wastes and finally a Waste Water Treatment Plant. The amount of oil, grease, and other
pollutants that wash off car service can be extremely damaging to the environment. So a separate
sewer and storm water drainage is planned.Particularly in the case of Bharatpur Municipality,
Chitwan Automobile Business Association will bear all the construction costs whilst the land for
construction is provided by Municipality.
Table 4: The possible outcome of Automobile Cluster Industry
Communities
Expanded local business
opportunities

Environment
Continuous environmental
improvement

Business
Higher profitability

Community pride

Innovative environmental
solutions
Increased protection of
natural ecosystems
More efficient use of natural
resources

High performance
workplaces
Improved efficiency

Reduced waste disposal costs

Improved environment and
habitat
Improved health for
employees and community

Access to financing
Higher value for developers

Partnership with business

Reduction of operating costs

(i.e. energy, materials)

Minimized impact on
infrastructure
Improved aesthetics

Reduction in disposal costs

Reduction of environmental
liability
Good jobs
Improved public image
The industrial policy and the Foreign Investment and Technology Act, 1981 paved the way for
regular inflow of foreign investment and technology transfer into the country. The foreign investment
in Nepal are regulated and administered by Foreign Investment and Technology Transfer Act
(FITTA) 1992 and Industrial Enterprises Act (IEA), 1992. The Department of Industries (DOI) is the
sole agency for administration and implementation of Foreign Investment and Technology Transfer
Act in Nepal. In Nepal, As per the Industrial Policy,2011 The non-resident Nepali people shall be
encouraged to invest in Nepal for protection, diversification and promotion of foreign investment and
economic diplomacy units at Nepalese Embassies and missions located in the countries making more
foreign direct investment shall be strengthened for promotion of industrial investment.
Eco-Industry Cluster is still a new concept for a country like Nepal which has far pace to travel in
industrialization. For financing and capacity building, there is urgent need of policy regarding Ecoindustry in Central level followed by the need of elected body of the Local Government. Moreover
there is no provision for an autonomous body like Municipality to formulate its own policy. So, there
must be provision along with capital from Central Government for financing as well as capacity
building. The consensus and capacity building of local body is required along with stakeholders like

Chitwan Chamber of Commerce and Industries, Chitwan Association of Industries and other related
private sectors, Office of Cottage and Small Industry Chitwan.

References:
1. www.lawscommission.gov.np
2. www.epa.vic.gov.au
3. www.npc.gov.np
4. Industrial Policy 2011, Department of Industry,Nepal
5.Thirteenth Year Plan Approach FY 2070/71-2072/73, National Planning Commission of Nepal
6. Maile Deppe and Ed Cohen-Rosenthal, Handbook of Codes, Covenans, Conditions, and
Restrictions for Eco-Industrial Development, Work and Environment Initiative. 1999