Finance Ministry Proposes Revival of Biratnagar Jute Mill with Plan to Convert It into an Industrial Museum

The government has initiated a study of various options to either restart the Biratnagar Jute Mill, which was shut down 17 years ago, or to develop it as an industrial museum. The Ministry of Finance has proposed handing over management of the mill to the private sector on a contractual basis, converting it into a museum, or developing a smart industrial zone at the site. A task force, led by the Joint Secretary of the Ministry of Industry, Commerce and Supplies, is expected to submit a report within a month detailing the mill’s assets, liabilities, and potential strategic options. Kathmandu, 28 Shrawan. The government is preparing to revive the Biratnagar Jute Mill, which the Cabinet decided to dissolve after continuous losses 17 years ago, accompanied by a proposal to convert it into an industrial museum.

In 2066 BS (2009-2010), the Nepal government had decided to proceed with liquidation of the mill. Correspondence was initiated with the Office of the Company Registrar to commence the process. However, some governments intermittently attempted to restart the mill. The industry has remained fully closed since 2072 BS (2015-2016). The Ministry of Finance has recommended developing the mill site as an industrial museum. According to sources within the ministry, the government is reluctant to bear the costly expenses of restarting the industry and thus has proposed entrusting it to the private sector through long-term lease or management contracts.

Since the mill was Nepal’s first industrial establishment, the ministry has proposed, in coordination with the provincial government and Biratnagar Metropolitan City, to develop its land, machinery, equipment, and buildings as an industrial museum. Another option is to develop a Green Special Economic Zone on the mill’s land, launching smart industries based on clean green energy. The third alternative involves finding strategic partners to restart the jute mill with new technology and additional capital infusion. However, past failures of the mill’s operation under lease or management contracts have made the options of an industrial museum and a smart industrial zone seem more suitable, according to ministry sources.

Discussions regarding the industrial operations have also taken place with the Prime Minister’s Office. The brief report prepared by the Ministry of Finance notes ambiguity about the industry’s condition, assets, and liabilities. The operational status of machinery and equipment is unknown, and there is a lack of detailed market feasibility studies related to jute products, making it difficult to decide on reopening the mill. The report states: “The operational condition of machinery and equipment is uncertain, precise details of land and physical assets are unavailable, and liabilities including outstanding debts, taxes, and other obligations have yet to be confirmed.”

Originally established on July 13, 1936, as Biratnagar Jute Mills Limited with the purpose of producing jute, the mill operated profitably until 2050 BS (1993-1994), but later suffered losses for reasons that remain unclear. To study the deteriorated state of its tools, equipment, and structure, a task force led by the Joint Secretary of the Ministry of Industry, Commerce and Supplies has been formed. The group will assess the mill’s infrastructure, machinery, assets, liabilities, and review past government decisions. The task force is mandated to present a report within a month outlining potential revival strategies.

Privatization and restructuring efforts of Biratnagar Jute Mill have spanned three decades. On December 14, 1995, the Privatization Committee selected the mill for the next phase of privatization. Subsequently, the industry was handed over on management contracts. On July 9, 1997 (13 Asar 2053 BS), the Jute Mills notified the Ministry of Finance’s Privatization Unit that the mill was under management contract since that date. As losses mounted, the Cabinet decided to liquidate the mill in 2066 BS (2009-2010) and appointed liquidators via the Company Registrar with a six-month timeframe to complete the process. The committee also resolved to involve private investors in liquidation costs and to secure loans by mortgaging the mill’s assets.

The Ministry of Industry corresponded with the Company Registrar on March 7, 2010 to implement the committee’s decisions. On June 28, 2010, the government decided to entrust the security and care of the mill to the Armed Police Force, Morang Border Security Office. On January 1, 2010, the Ministry of Industry proposed a loan for employee severance payments. The Cabinet further instructed on January 4, 2010, to release the employees. By mid-January 2010, the Ministry of Finance had approved a loan of NPR 559.2 million for pending salaries and benefits. The Cabinet’s Economic Infrastructure Committee ordered a transfer of the mill’s land, structures, and factory ownership to the Ministry of Industry. In 2012, the Industry Ministry wrote to the Finance Ministry proposing full liquidation of the mill, but on February 28, 2012, the Cabinet reviewed and rescinded liquidation and instead directed the industry ministry to offer the mill to the private sector via lease.

Following this decision, the government handed over management of the mill to the Indian company Winsome International Limited on December 18, 2012 (3 Mangsir 2069 BS). The lease agreement required the company to pay the government NPR 13.5 million per year. The company operated the mill for 11 months and 18 days before power supply issues forced its closure in 2014 (2071 BS). On September 20, 2016, the jute mill terminated the lease agreement with the Indian company, and two days later, the board officially cancelled it. After the termination, the Ministry of Finance requested details regarding factory operations and rent payments on December 30, 2016. The industry responded that it was not operational, disclosed the state of assets, confirmed rent payments, and submitted audit reports.

During this period, former Industry Minister Mahesh Basnet attempted to reduce the government’s shareholding from 68 percent to 32 percent through appointed board chairman Basant Van and Managing Director Nilhari Kafle, reportedly planning a major financial fraud. However, the Department of Investigation’s active involvement prevented this scheme from materializing.