Why Many Factories in Nepal Are Inactive Today: Political, Economic, and Structural Realities

📉 Why Many Factories in Nepal Are Inactive Today: Political, Economic, and Structural Realities

Many state-owned factories in Nepal, including Gorakhkali Tyre Industry and Hetauda Textile Industry, remain inactive due to political instability and economic challenges.

Nepal’s industrial journey has been slow, uneven, and full of interruptions. While the country once envisioned a strong manufacturing base to reduce imports and create domestic employment, many factories that symbolized that dream are now inactive, partially operational, or permanently closed.

These inactive factories are not just empty buildings - they represent:

1. Lost employment opportunities
2. Wasted public investment
3. Political instability
4. Policy failure
5. Weak industrial competitiveness

In this article, we explore:

Major inactive factories in Nepal

1. The case of Gorakhkali Tyre Industry
2. The political reasons behind industrial decline
3. Economic and structural barriers
4. Socio-economic consequences
5. Whether revival is possible

🏭 Major Inactive Factories in Nepal

Nepal has witnessed the closure of several landmark state-owned industries over the past three decades. Many were established in the 1960s–1980s during the era of state-led industrialization.

Below are some of the most notable examples.

🧶 Hetauda Textile Industry

Established in 1975 with Chinese assistance, this factory was once a major textile producer in Nepal. It employed thousands of workers and supplied fabrics nationwide.

However, due to:

• Poor management
• Outdated technology
• Political interference
• Rising operational costs

The factory accumulated heavy losses and was eventually liquidated. Its closure symbolized the decline of Nepal’s state-owned textile sector.

🧵 Butwal Yarn Factory

Another major public enterprise, Butwal Yarn Factory produced yarn for domestic textile industries. But over time:

1. Labor disputes increased
2. Political unions interfered
3. Machinery became outdated
4. Production costs rose

The factory shut down after years of financial losses.

🚬 Janakpur Cigarette Factory

Once a profitable tobacco company under government ownership, Janakpur Cigarette Factory later suffered from:

1. Mismanagement
2. Political appointments instead of professional leadership

Competition from private tobacco companies

It became inactive and remains one of the most debated examples of failed public enterprise management.

🧵 Biratnagar Jute Mills

One of Nepal’s oldest industries, established in 1936, Biratnagar Jute Mills played a historic role in Nepal’s industrial and political movement.

But frequent shutdowns occurred due to:

1. Political strikes
2. Labor unrest
3. Financial losses
4. Ownership disputes

Though revival attempts have been made, it has never regained its former strength.

🧪 Bhrikuti Pulp and Paper

Once Nepal’s largest paper factory, Bhrikuti Pulp and Paper closed permanently after facing environmental, financial, and management challenges.

🛞 The Case of Gorakhkali Rubber Industry (Gorakhkali Tyre Industry)

One of the most symbolic inactive factories in Nepal is the Gorakhkali Rubber Industry in Hetauda.

🏗️ Background

1. Established in 1984
2. Produced tyres for bicycles, tractors, and vehicles
3. Aimed to reduce Nepal’s dependency on imported tyres
4. Provided employment to hundreds of workers

For years, it was a source of national pride.

📉 Why Did It Collapse?

The factory gradually became inactive due to several factors:

1. Inability to compete with cheaper imported tyres from India and China
2. Lack of modernization and technology upgrades
3. Political interference in management appointments
4. Corruption allegations
5. Financial mismanagement
6. Irregular raw material supply
7. Over time, production halted completely.

⚖️ Political Interference

Gorakhkali became a victim of politicization:

1. Management positions were filled based on party loyalty
2. Labor unions aligned with political parties frequently protested
3. Operational decisions were influenced by politics rather than business strategy
4. This created instability inside the factory, reducing productivity and investor confidence.
5. Despite repeated announcements by successive governments to revive it, meaningful restructuring has not been implemented.

Today, Gorakhkali Rubber Industry stands as a powerful reminder of how political instability can damage national industries.

🏛️ Political Reasons Behind Factory Inactivity in Nepal

Political instability is one of the strongest underlying reasons for industrial decline in Nepal.

Let’s examine how politics directly impacts factories.

1️⃣ Frequent Government Changes

Nepal has experienced frequent changes in government since the 1990 democratic movement.

Each new government often:

1. Changes industrial policy direction
2. Replaces key officials
3. Alters investment priorities
4. Suspends or delays long-term projects

Factories require long-term stability, but political volatility disrupts planning and confidence.

2️⃣ Politicization of Public Enterprises

Many state-owned factories suffered because:

1. CEOs were appointed based on political connections
2. Board members lacked technical expertise
3. Decisions were influenced by party interests
4. Instead of being run as competitive businesses, factories were often treated as political assets.

3️⃣ Labor Union Politics

Labor unions are important for worker rights, but in Nepal many are affiliated with political parties.

This has resulted in:

1. Frequent strikes 
2. Production stoppages
3. Pressure for unrealistic wage increases
4. Internal conflict

In factories like Biratnagar Jute Mills and Gorakhkali Tyre, union politics significantly disrupted operations.

4️⃣ Civil Conflict (1996–2006)

The decade-long Maoist insurgency severely impacted Nepal’s industrial sector.

During this period:

1. Transportation routes were unsafe
2. Extortion and security threats increased
3. Investors hesitated to expand
4. Production slowed down

Many factories either reduced output or shut down during the conflict years.

5️⃣ Weak Policy Continuity

Industrial growth requires:

1. Consistent taxation policy
2. Stable energy policy
3. Export promotion support
4. Infrastructure investment

However, frequent policy shifts have discouraged both domestic and foreign investors.

📉 Economic Reasons for Industrial Decline

Beyond politics, economic factors also played a major role.

🔌 Energy Crisis

For years, Nepal suffered from severe load-shedding (up to 16 hours daily before 2016). Factories dependent on continuous electricity faced heavy losses.

🌍 Cheap Imports

Nepal imports most manufactured goods from India and China. These products are often:

1. Cheaper
2. Mass-produced
3. Higher quality
4. Local factories struggled to compete.

🚛 Poor Infrastructure

High transportation costs, landlocked geography, and border delays increased production expenses.

💰 Limited Capital Investment

Banks became cautious about lending to industries after many factories failed. This reduced industrial expansion.

👥 Socio-Economic Impact
Inactive factories affect society deeply.

1️⃣ Unemployment

Thousands of workers lost stable jobs when factories shut down.

2️⃣ Migration

Lack of domestic jobs pushed youth toward foreign employment in Gulf countries and Malaysia.

3️⃣ Increased Trade Deficit

With fewer domestic industries, Nepal imports more goods - widening the trade gap.

4️⃣ Urban Decline

Industrial towns like Hetauda and Biratnagar experienced economic slowdown after factory closures.

🔄 Can These Factories Be Revived?

Revival is possible - but only under certain conditions.

✔️ Professional Management

Factories must be run by business experts - not political appointees.

✔️ Public-Private Partnership (PPP)

Private investment and accountability could improve efficiency.

✔️ Technology Upgrade

Modern machinery is necessary to compete regionally.

✔️ Export Strategy

Nepal must focus on niche industries where it has comparative advantage.

✔️ Political Stability

Without stable governance, revival efforts will remain temporary.

🧭 Final Reflection: A Lesson for Nepal’s Future

The story of inactive factories in Nepal - including Gorakhkali Tyre Industry - is not just about financial loss. It reflects:

1. Political instability
2. Weak governance
3. Lack of industrial vision
4. Global competition challenges

However, Nepal is at a turning point.

With improved electricity supply, growing infrastructure development, and increasing awareness about economic self-reliance, there is still hope.

If Nepal learns from past mistakes - especially political interference in industries - it can rebuild a modern, competitive industrial sector.

Factories should not become monuments of failure.

They should become engines of employment, production, and national pride.

📉 Why Many Factories in Nepal Are Inactive Today: Political, Economic, and Structural Realities

Many state-owned factories in Nepal, including Gorakhkali Tyre Industry and Hetauda Textile Industry, remain inactive due to political instability and economic challenges.

Nepal’s industrial journey has been slow, uneven, and full of interruptions. While the country once envisioned a strong manufacturing base to reduce imports and create domestic employment, many factories that symbolized that dream are now inactive, partially operational, or permanently closed.

These inactive factories are not just empty buildings - they represent:

1. Lost employment opportunities
2. Wasted public investment
3. Political instability
4. Policy failure
5. Weak industrial competitiveness

In this article, we explore:

Major inactive factories in Nepal

1. The case of Gorakhkali Tyre Industry
2. The political reasons behind industrial decline
3. Economic and structural barriers
4. Socio-economic consequences
5. Whether revival is possible

🏭 Major Inactive Factories in Nepal

Nepal has witnessed the closure of several landmark state-owned industries over the past three decades. Many were established in the 1960s–1980s during the era of state-led industrialization.

Below are some of the most notable examples.

🧶 Hetauda Textile Industry

Established in 1975 with Chinese assistance, this factory was once a major textile producer in Nepal. It employed thousands of workers and supplied fabrics nationwide.

However, due to:

• Poor management
• Outdated technology
• Political interference
• Rising operational costs

The factory accumulated heavy losses and was eventually liquidated. Its closure symbolized the decline of Nepal’s state-owned textile sector.

🧵 Butwal Yarn Factory

Another major public enterprise, Butwal Yarn Factory produced yarn for domestic textile industries. But over time:

1. Labor disputes increased
2. Political unions interfered
3. Machinery became outdated
4. Production costs rose

The factory shut down after years of financial losses.

🚬 Janakpur Cigarette Factory

Once a profitable tobacco company under government ownership, Janakpur Cigarette Factory later suffered from:

1. Mismanagement
2. Political appointments instead of professional leadership

Competition from private tobacco companies

It became inactive and remains one of the most debated examples of failed public enterprise management.

🧵 Biratnagar Jute Mills

One of Nepal’s oldest industries, established in 1936, Biratnagar Jute Mills played a historic role in Nepal’s industrial and political movement.

But frequent shutdowns occurred due to:

1. Political strikes
2. Labor unrest
3. Financial losses
4. Ownership disputes

Though revival attempts have been made, it has never regained its former strength.

🧪 Bhrikuti Pulp and Paper

Once Nepal’s largest paper factory, Bhrikuti Pulp and Paper closed permanently after facing environmental, financial, and management challenges.

🛞 The Case of Gorakhkali Rubber Industry (Gorakhkali Tyre Industry)

One of the most symbolic inactive factories in Nepal is the Gorakhkali Rubber Industry in Hetauda.

🏗️ Background

1. Established in 1984
2. Produced tyres for bicycles, tractors, and vehicles
3. Aimed to reduce Nepal’s dependency on imported tyres
4. Provided employment to hundreds of workers

For years, it was a source of national pride.

📉 Why Did It Collapse?

The factory gradually became inactive due to several factors:

1. Inability to compete with cheaper imported tyres from India and China
2. Lack of modernization and technology upgrades
3. Political interference in management appointments
4. Corruption allegations
5. Financial mismanagement
6. Irregular raw material supply
7. Over time, production halted completely.

⚖️ Political Interference

Gorakhkali became a victim of politicization:

1. Management positions were filled based on party loyalty
2. Labor unions aligned with political parties frequently protested
3. Operational decisions were influenced by politics rather than business strategy
4. This created instability inside the factory, reducing productivity and investor confidence.
5. Despite repeated announcements by successive governments to revive it, meaningful restructuring has not been implemented.

Today, Gorakhkali Rubber Industry stands as a powerful reminder of how political instability can damage national industries.

🏛️ Political Reasons Behind Factory Inactivity in Nepal

Political instability is one of the strongest underlying reasons for industrial decline in Nepal.

Let’s examine how politics directly impacts factories.

1️⃣ Frequent Government Changes

Nepal has experienced frequent changes in government since the 1990 democratic movement.

Each new government often:

1. Changes industrial policy direction
2. Replaces key officials
3. Alters investment priorities
4. Suspends or delays long-term projects

Factories require long-term stability, but political volatility disrupts planning and confidence.

2️⃣ Politicization of Public Enterprises

Many state-owned factories suffered because:

1. CEOs were appointed based on political connections
2. Board members lacked technical expertise
3. Decisions were influenced by party interests
4. Instead of being run as competitive businesses, factories were often treated as political assets.

3️⃣ Labor Union Politics

Labor unions are important for worker rights, but in Nepal many are affiliated with political parties.

This has resulted in:

1. Frequent strikes 
2. Production stoppages
3. Pressure for unrealistic wage increases
4. Internal conflict

In factories like Biratnagar Jute Mills and Gorakhkali Tyre, union politics significantly disrupted operations.

4️⃣ Civil Conflict (1996–2006)

The decade-long Maoist insurgency severely impacted Nepal’s industrial sector.

During this period:

1. Transportation routes were unsafe
2. Extortion and security threats increased
3. Investors hesitated to expand
4. Production slowed down

Many factories either reduced output or shut down during the conflict years.

5️⃣ Weak Policy Continuity

Industrial growth requires:

1. Consistent taxation policy
2. Stable energy policy
3. Export promotion support
4. Infrastructure investment

However, frequent policy shifts have discouraged both domestic and foreign investors.

📉 Economic Reasons for Industrial Decline

Beyond politics, economic factors also played a major role.

🔌 Energy Crisis

For years, Nepal suffered from severe load-shedding (up to 16 hours daily before 2016). Factories dependent on continuous electricity faced heavy losses.

🌍 Cheap Imports

Nepal imports most manufactured goods from India and China. These products are often:

1. Cheaper
2. Mass-produced
3. Higher quality
4. Local factories struggled to compete.

🚛 Poor Infrastructure

High transportation costs, landlocked geography, and border delays increased production expenses.

💰 Limited Capital Investment

Banks became cautious about lending to industries after many factories failed. This reduced industrial expansion.

👥 Socio-Economic Impact
Inactive factories affect society deeply.

1️⃣ Unemployment

Thousands of workers lost stable jobs when factories shut down.

2️⃣ Migration

Lack of domestic jobs pushed youth toward foreign employment in Gulf countries and Malaysia.

3️⃣ Increased Trade Deficit

With fewer domestic industries, Nepal imports more goods - widening the trade gap.

4️⃣ Urban Decline

Industrial towns like Hetauda and Biratnagar experienced economic slowdown after factory closures.

🔄 Can These Factories Be Revived?

Revival is possible - but only under certain conditions.

✔️ Professional Management

Factories must be run by business experts - not political appointees.

✔️ Public-Private Partnership (PPP)

Private investment and accountability could improve efficiency.

✔️ Technology Upgrade

Modern machinery is necessary to compete regionally.

✔️ Export Strategy

Nepal must focus on niche industries where it has comparative advantage.

✔️ Political Stability

Without stable governance, revival efforts will remain temporary.

🧭 Final Reflection: A Lesson for Nepal’s Future

The story of inactive factories in Nepal - including Gorakhkali Tyre Industry - is not just about financial loss. It reflects:

1. Political instability
2. Weak governance
3. Lack of industrial vision
4. Global competition challenges

However, Nepal is at a turning point.

With improved electricity supply, growing infrastructure development, and increasing awareness about economic self-reliance, there is still hope.

If Nepal learns from past mistakes - especially political interference in industries - it can rebuild a modern, competitive industrial sector.

Factories should not become monuments of failure.

They should become engines of employment, production, and national pride.

About the Author

Momilan is the founder of InfoNest Insight Hub and a passionate blogger focused on educational content, cultural research, and practical online knowledge. He writes to help readers learn useful skills, understand society, and explore new opportunities in the digital world.