[BEN] Binod Lingden Subba

Chapter 3
ECONOMIC POLICIES AND REFORMS
Lecturer: Binod Lingden Subba

Meaning of privatization Methods of privatization

Privatization is the process of transferring an enterprise or
industry from the public sector to the private sector. It is the
process of transferring the ownership of business from the
public sector to the private sector. In broader meaning,
privatization refers to restrict government’s role and to put
forward some methods or policies in order to strengthen free
market economy.
a) Asset sales: Under this method of privatization, the
production (machinery, raw materials) and service
(laptops, printers, furniture) units and other assets of
enterprises are transferred to the private sector in return
for a price. This method was used to privatize Brikuti
Paper Factory, Harisiddhi Brick and Tile Factory Limited,
and Bansbari Leather and Shoes Limited.

Objective of privatization b) Business sales: Under this method of privatization, total

 Greater efficiency.
 Revealing the true and full cost of the service provided.
 Promotion of technological advancement.
 Development of capital markets.
 Broadening the wealth and achieving widespread private
ownerships in society.
 Curbing inflation.
 Raising extra-revenues for the government.
 Eliminating hidden unemployment and reducing the
power of public employee unions.
ownership of public enterprises is transferred into private
enterprises. This method was used to privatize Brikuti
Paper Factory, Harisiddhi Brick and Tile Factory Limited,
and Bansbari Leather and Shoes Limited.
c) Share sales: Under this method of privatization, certain
percentage of share is transferred to the general public,
employees and private organization. This method was
used to privatize Nepal Telecom Company, Nepal Film
Industry Limited, Balaju Textile Industry, and Nepal
Lube Oil Limited.

d) Management contract: Under this method of Privatization policy in Nepal

privatization, government may sometimes retain full
ownership of public economic enterprises but transfer The policy of privatization in Nepal was specified, for the
its management to a private firm/sector for a first time, in the Sixth Plan. Such a policy has been
temporary period of time. The firm is provided the incorporated in all the subsequent Development Plans. In
right of operation and control of the enterprise. The addition, the Government has made a number of Cabinet
main objective of the management contract is to and Ministry level decisions on such policy from time to
enhance the efficiency and productivity of the time. In 1985, about 12 public enterprises were planned for
enterprise. This method was used to privatize privatization. This ambitious plan could not, however, be
Biratnagar Jute Mills Company Limited. materialized. The Government then decided to sell the
shares of some of the leading financial institutions to the
e) Lease Assets: Under this method, benefiting rights of general public at premium prices.
the assets is transferred to private sector for a
specified period of time. The contractor pays certain In 1989, a Privatization Cell was created in the Ministry of
fee to the government against the use of property. This Finance to plan and implement the privatization program.
method was used to privatize Bhaktapur Brick A policy paper on privatization was issued by the
Factory, Lumbini Sugar Factory, and Nepal Rojin Government in 1991, which laid down the policies,
and Turpentine Limited. modalities and administrative mechanisms for privatization
of public enterprise. In January 1994, the Privatization Act
f) Other methods: Other methods of privatization came into force.
include liquidation and renting.
The act defines the term privatization as “the participation of
private sector in the management of enterprises or selling it or
giving on lease or transferring of government ownership to a
private sector, employees, or desirous groups either partially or
fully in such an enterprise”.

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The main features of the act are as follow: d) Evaluation of proposal: The proposal of privatization
a) Formation of privatization committee: Privatization is evaluated on the following basis:
committee shall be formed to organize the o Attractive price
privatization of enterprises under the chairmanship of o Management of enterprise without changing its nature
the minister of finance. o Retention of the services of present workers and
employees
b) Power, functions and duties of the committee: The o Enhancement of the employment opportunity
Committee is to conduct studies, evaluate the enterprises, o Managerial experience
remove hindrances faced in privatization, formulate o Expansion of the enterprise and business by preparing a
privatization programs, and recommend the scheme to good business plan and making employment opportunity.
the Government for execution. The committee has the
authority to invite any national or foreign expert or e) Settlement of disputes: If any dispute arises, it is
consult to attend its meeting as an observer. resolved through mutual consultation among concerned
parties.
c) Process of privatization: The process of privatization
has been specified as under: f) Provisions relating to employees
o By sale of shares o The government may ensure the continuity of service
o By formation of cooperatives; of the present workers of the enterprise to be
o By selling assets of the enterprise; privatized.
o By leasing out the assets of the enterprise; o If the continuity of service could not be maintained, the
o By involving private sector in the management of the government may, on recommendation of the
enterprise; and
committee, retire such employees.
o By adopting any other modalities considered appropriate
o Where retrenchment is granted, the government shall
by the Government on the basis of the recommendation
of the Committee.
arrange for reasonable compensation or benefits for
employees and workers.
g) Liquidation of enterprises: Privatization practice in Nepal
o The government can dissolve wholly owned enterprise
by publishing a notification to that effect in the Nepal The policy of privatization in Nepal was specified, for the
Gazette. first time, in the Sixth Plan. Such a policy has been
o All arrears due to the enterprise liquidated shall be incorporated in all the subsequent Development Plans. In
recovered as government dues. addition, the Government has made a number of Cabinet
o The government may transfer the assets and liabilities and Ministry level decision on such policy from time to
of the enterprise liquidated to any other body. time. In 1985, about 12 public enterprises were planned for
o If all liabilities of the enterprise could not be fully privatization. This ambitious plan could not, however, be
settled from the assets of the enterprise, the residual materialized. The Government then decided to sell the
liabilities shall be settled according to the existing shares of some of the leading financial institutions to the
laws. general public at premium prices.
In 1989, a Privatization Cell was created in the Ministry of
Finance to plan and implement the privatization program.
A policy paper on privatization was issued by the
Government in 1991, which laid down the policies,
modalities and administrative mechanisms for privatization
of public enterprise. In January 1994, the Privatization Act
came into force.
The act defines the term privatization as “the
participation of private sector in the management of
enterprises or selling it or giving on lease or transferring of
government ownership to a private sector, employees, or
desirous groups either partially or fully in such an enterprise”.

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By 2016, altogether 30 public enterprises are privatized,  In the second phase, five more public enterprises were
out of which 11 are in operation. Out of them only 5 are privatized, namely (a) Nepal Film Development Company, (b)
making profits. Balaju Textile Industry, (c) Raw Hide Collection and
Development Corporation, (d) Nepal Lube Oil, and (e) Nepal
 The privatization program is based partly on the perception Bitumen and Barrel Udhyog. This time, the model of
that public sector enterprises are inefficient and have placed privatization was the sale of block shares by public tender. In
an undue burden on the budget. addition, Jute Development and TradingCorporation and
 In the first phase, three public enterprises were privatized Tobacco Development Company were liquidated.
through the sale of assets by public tender. The enterprises 
thus privatized were Bhrikuti Paper Mills, Harisiddhi Brick In the third phase, six more enterprises were privatized.
and Tile Factory, and Bansbarfi Leather and Shoe Factory. These were Agricultural Tools Factory, Nepal Foundry,
 Bhaktapur Bricks, Raghupati Jute Mills, Nepal Bank Ltd.
(sale of government-owned shares), and Nepal Coal Ltd.
Furthermore, the remaining sixteen enterprises were
privatized.

Privatization policy

The policy of privatization in Nepal was specified, for the first time, in the Sixth Plan. Such a policy has been
incorporated in all the subsequent Development Plans. In addition, the Government has made a number of Cabinet and
Ministry level decisions on such policy from time to time. In 1985, about 12 public enterprises were planned for
privatization. This ambitious plan could not, however, be materialized. The Government then decided to sell the shares
of some of the leading financial institutions to the general public at premium prices.

In 1989, a Privatization Cell was created in the Ministry of Finance to plan and implement the privatization program. A
policy paper on privatization was issued by the Government in 1991, which laid down the policies, modalities and
administrative mechanisms for privatization of public enterprise. In January 1994, the Privatization Act came into force.
The act defines the term privatization as “the participation of private sector in the management of enterprises or selling
it or giving on lease or transferring of government ownership to a private sector, employees, or desirous groups either
partially or fully in such an enterprise”.

The main features of this act are as follow:

a) Formation of privatization committee: Privatization committee shall be formed to organize the privatization of
enterprises under the chairmanship of the minister of finance.

b) Power, functions and duties of the committee: The Committee is to conduct studies, evaluate the enterprises,
remove hindrances faced in privatization, formulate privatization programs, and recommend the scheme to the
Government for execution. The committee has the authority to invite any national or foreign expert or consult to
attend its meeting as an observer.

c) Process of privatization: The process of privatization has been specified as under:

 By sale of shares
 By formation of cooperatives;
 By selling assets of the enterprise;
 By leasing out the assets of the enterprise;
 By involving private sector in the management of the enterprise; and
 By adopting any other modalities considered appropriate by the Government on the basis of the recommendation of
the Committee.

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d) Evaluation of proposal: The proposal of privatization is evaluated on the following basis:

 Attractive price
 Management of enterprise without changing its nature
 Retention of the services of present workers and employees
 Enhancement of the employment opportunity
 Managerial experience
 Expansion of the enterprise and business by preparing a good business plan and making employment opportunity.

e) Settlement of disputes: If any dispute arises, it is resolved through mutual consultation among concerned parties.

f) Provisions relating to employees

 The government may ensure the continuity of service of the present workers of the enterprise to be privatized.
 If the continuity of service could not be maintained, the government may, on recommendation of the committee,
retire such employees.
 Where retrenchment is granted, the government shall arrange for reasonable compensation or benefits for employees
and workers.

g) Liquidation of enterprises:
 The government can dissolve wholly owned enterprise by publishing a notification to that effect in the Nepal Gazette .
 All arrears due to the enterprise liquidated shall be recovered as government dues.
 The government may transfer the assets and liabilities of the enterprise liquidated to any other body.
 If all liabilities of the enterprise could not be fully settled from the assets of the enterprise, the residual liabilities
shall be settled according to the existing laws.

Industrial policy, 2010

To make remarkable contribution in national economy through sustainable and broad-based industrial development in an
effective, coordinated and collaborative partnership of public, private and cooperative sectors thereby to support poverty alleviation.

Objectives p2]Zo
 To increase export of industrial products along with growth in national income and employment through
enhancement of quality and competitive industrial products and productivity;
 To increase contribution of industrial sector in the balanced national and regional development by mobilizing local
resources, raw materials, skills and means;
 To establish industrial entrepreneurship as a sustainable and reliable sector by utilizing latest technology and
environment friendly production process;
 To create strong basis of investment having developed productive human resources and managerial capacity required
for industrial development thereby establish Nepal as an attractive place for investment in the South Asian region
and in the world as well by;
 To protect industrial intellectual property rights.

Trade policy, 2015

Goal
Aims to achieve inclusive and sustainable economic growth through export promotion.

Objectives
 To enhance supply related capacity, reduce trade deficit by increasing exports of value added and competitive goods
and services.
 To increase access of goods, services and intellectual property to the regional and global markets.

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Labour and employment policy, 2015

To provide productive, non-discriminatory, exploitation-free, decent, safe and healthy work opportunities for citizens of
the working ages by building an environment of friendly investments, in addition to building and manage a labour
market that contributes to the national economy so that it can compete at the global level.

Objectives
 Provide opportunities for productive and full employment to all manpower of nation by creating investment-friendly
environment.
 To augment productivity by eliminating forced labour practices.
 To make the labour market safe, fair, competitive and flexible.
 To enhance the prospects of employment and self-employment by developing high-quality multi-skilled human
resources.
 To ensure equal access of women, dalits, indigenous nationalities and the displaced people to employment.
 To eliminate child labour.
 To make labour and employment administration smart, up-to-date, efficient and effective.
Tourism policy, 2008

The vision of tourism policy is to develop Nepal as an attractive, charming and safe destination on the world map
through protection and promotion of its natural, cultural, biological and man-made heritage.

Goal
The goal of tourism sector is to increase standard of living of people by significantly increasing the share of tourism in
national income through sustainable use of national heritage.

Objectives
The objectives of tourism policy are:
 Develop tourism as the main basis of national economy through its diversification, expansion, creation of self
employment, linkage of eco-tourism and rural tourism with poverty alleviation to improve standard of living of
general masses.
 Develop Nepal as an attractive and main tourist destination by search, preservation, promotion and development of
national heritage.
 Develop, expand and promote tourism through easy, safe, reliable and regular air and land transport.
 Make sustainable use of natural resources with environment protection in the process of developing and constructing
tourism infrastructure.
Monetary policy

The Nepal Rastra Bank on Wednesday, July 24, announced the new Monetary Policy for the Fiscal Year (FY) 2076/77
(2019/20). The central bank has accorded significant priority to promoting bank mergers and achieving the government’s
ambitious growth target of 8.5 percent for the upcoming fiscal year.

The key highlights of the Monetary Policy 2076/77 (2019-2020) are:

 The Cash Reserve Ratio (CRR) for domestic banks, commercial banks and financial institutions remains fixed at 4%
each.
 Inflation rate for the coming fiscal year 2076/77 has been targeted to 6% from the previous 6.5%
 The Statutory Liquidity Ratio (SLR) for commercial banks, development banks and financial institutions has
remained the same as their previous rate at 10%, 8% and 7% respectively.
 The Capital-Cum-Deposit (CCD) for banks and financial institutions are to remain unrevised for FY 2076/77.

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Currently, the CCD imposed on banks stands at 80%.

 The policy has targeted to expand credit availability to the government and the private sector up by 24% and 1%
respectively, from the target of 22.5% and 20% in the last FY.
 The Central Bank has reduced the bank rate from 4.5% to 5% to reduce the interest rate fluctuations.
 The central bank has also eased the regulatory provisions for banks to merge by mid-July 2020. The policy allows
merging banks to maintain the spread rate at 4.4 percent and 10 percent for the agricultural sector’s lending and issue
debentures within the next two years.
 The Interest Rate Corridor has the following features:

Fiscal policy 2019/20

Budget Size: Rs 15.32 kharba

Current Expenditure: Rs 9.57 kharba (62.4%)
Capital Expenditure: Rs 4.08 kharba (26.6%)
Financing: Rs 1.67 kharba (11%)
Tax revenue: Rs 9.81 kharba
Foreign Grant: Rs 57.99 arba
Foreign Debt: Rs 2.98 kharba
Internal Debt: Rs 1.95 kharba
Inflation to be controlled under 6%This year's major updates:
Growth Rate: 7%
Inflation: 4.5%
Import increased by double in the first 9 months
2257 branches of BFIs opened this year.
39% decline in workers going abroad
21% rise in remittance
Dr. Yuvraj Khatiwada is currently presenting the budget for the FY 2076/77. Here are the major
announcements:

Major policies for upcoming fiscal year:

The major objective of this year's budget is to promote fundamental right of citizens and upgrade economy of
developing countries.

Education
1. Rs 1.63 kharba for education
2. 70 districts targeted to receive full literacy rate in upcoming FY
3. Rs 8.53 arba allocated for constructing 300 schools
4. Rs 3.19 arba allocated for scholarships
5. Rs 1.50 arba for volunteer teachers in schools where teachers are not available
6. Rs 1.92 arba to conduct skill-based training for 83,000 youths
7. To bring one window policy for operation of all universities

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Health
1. Rs 68 arba for health sector
2. Primary service to be made free of cost from all local level medical facilities
3. All Nepalis to be brought inside health insurance net
4. Rs 2.20 arba for people under poverty line
5. 52,000 female volunteers will be getting Rs 3000 as travel allowance, for this 15 crore has been allocated
6. Rs 5.57 arba for construction of emergency medical facilities in all VDCs
7. All provinces to have regional hospitals
8. Rs 1 arba allocated to upgrade of various hospitals
9. Rs 40 crore allocated to make Bir Hospital of International standard
10. Smoking prohibited from all public places and public transportation

Construction and labor

1. Rs 43.46 arba for drinking water
2. Rs 7.39 arba additional fund allocated for Melamchi Drinking water for infrastructure development
3. PMEP's unemployed individuals will be mobilized in various public works. Rs 5.1 crore allocated for it.
4. Rs 7.14 arba for employment program

Social security
1. Rs 64.5 arba for social security
2. Elderly allowance for people above 70 years of age increased from Rs 2000 to Rs 3000
3. 13 lakh elderly people will be benefitted
4. Labor employment agreement is done with the country importing Human Resource and the initial cost will
be bore by the employers
5. Single allowance is increased by Rs 1000 to Rs 2000
6. Retirement center to be established
7. People below poverty line and above the age of 70 will be given insurance worth Rs 1 lakh
8. 3.5 lakhs children below poverty line will be benefited with various government incentives

Youth and women

1. Youth scientific conference will be conducted in the coming year
2. Women entrepreneurship will be encouraged

Economy-Agriculture
1. Rs 34.80 arba for agriculture
2. Rs 8.10 arba for prime minister agriculture program
3. Potato and onion production will be increased
4. 50% increment in seed purchase budget to Rs 9 arba
5. Small farmers will be benefited via SKBBL
6. Public-private model will be implemented to increase agricultural production
7. Promote organic farming in all provinces with roof-top farming in city areas
8. People returned from foreign employment will be encouraged to enter into agriculture
9. Farmers will be disseminated information about agriculture via apps
10. Agriculture research centers and colleges will be supported
Irrigation
Rs 23.63 arba for irrigation
Weather radar will be brought into operation with Rs 60 crore allocated for 2 more radars

Forestry and environment

 Rs 15.49 arba for forestry and environment
 Declare this FY as afforestation year

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 Fruit-bearing trees and herbs will be sown in open forest areas

 Each province will have a research and development station for exploring herbs and plants
 116 ponds will be constructed

Land management
 Land act to be introduced
 Land bank to be established, where land can be taken in lease
 Digitization of all land ownership papers and blueprints within 2 years

Cooperative
 Tax relief for SMEs and agriculture based businesses
 Cooperatives to be supervised for risk management
 Cooperative information system to be established

Tourism
 Rs 22.68 arba allocated for tourism
 Visit Nepal 2020 to be celebrated and promoted by worldwide promotion
 One tourism door policy will be implemented
 Adventure tourism will be promoted
 Internal tourism to be promoted

Industry
 Rs 2.87 arba allocated for industry
 Local products will be promoted and prioritized
 Sick industries will be revived by the help of private sector
 Made in Nepal products will be made mandatory for gift-giving purpose
 5% interest subsidy in bank loans for garment industries
 Udayapur cement and Hetauda cement factories will be upgraded
 Challenge fund will be started as an initial capital fund for new and small industry
 Major export items will be prioritized
 Mining sector will be explored

Commerce and supplies

 Rs 11.74 arba allocated for commerce and supplies
 Tea branding will be done with auction houses
 Dry port in Chobhar and Rasuwagadhi to be established and construction already started
 Dry port of Bhairahawa to be upgraded
 Anti dumping regulation will be implemented in order to discourage import
 Supervision will be strengthened to control fake standard FMCG products
 Promoting trade with China
 Carteling and syndicate will be eradicated

Infrastructure: Energy
 Rs 89.83 arba for energy
 Two big hydro power in all provinces
 More than 1 KW electricity is projected to be produced in next fiscal year
 Upper Tamakoswhi and Rasuwagadhi hydro project to speed up
 1000 MW project to be added in the national grid.

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 3500 MW production to be expediate including Upper Tamakoshi, Arun and Trishuli

 PPP (Public Private Partnership) module will be explored in HEP production
 Local government to get budget to produce electricity from waste and garbage
 Hydro electricity projects that have received licenses but not in operation will be reconsidered
 Infrastructure: Transportation management and highway
 Rs 1.53 kharba for transportation management
 Rs 19.18 arba for express highway (East West Highway). The highway will connect Rasuwagadhi to Galchi to
Thori to the North.
 Rs 96 crore for upgrading BP highway
 Rs 1.81 arba allocated for Kathmandu ring road
 RS 6.27 arba for Nagdunga surung marga (underpass)
 Suryabinayak and Jadibuti highway to be upgraded
 Underpass in Baneswor will be constructed
 200 bridges to be constructed for which Rs 7 arba is allocated
 Re 1 duty added in diesel and petrol
 All the roads to be made at least 2 lane
 Railways infrastructure will be explored
 East-west and north-west railway to be developed
 Rs 7.7 arba to be allocated in order to explore PPP model for monorail and metro in the valley
 Engineering staff college to be established
 Syndicates to be abolished
 Adequate charging facility for electric vehicles with the initiation of NEA

Housing and Urban development

 Rs 43.73 arba for housing and urban development
 Smart cities to be established in various parts of the country
 Rs 4 arba allocated for construction of 300 houses under Safe Housing Project
 Assembly hall with capacity of 3000 people will be constructed in Kathmandu and 5000 capacity in next 3
years
 Assembly hall with 2000 people in each provinces
 Open areas of government will be used to construct park and green area
 Telephone and electricity lines will be kept underground

Earthquake reconstruction
 Rs 1 arba for Sundhara reconstruction within 2 years
 Rs 58.95 arba for rehabilation and construction work
 Rs 1.41 kharba allocated to reconstruct damages of earthquake
 Terai-madesh Sambriddhi program to be continued

Air infrastructure
 Rs 15.85 arba for air infrastructure
 TIA to be upgraded into a boutique airport and will be operational 24 hours
 First phase of Gautam Buddha Airport will be completed
 Rs 8 arba allocated for Pokhara airport
 Infrastructure to be developed for the airport without night-flying facility

Sports
 Rs 3.99 arba for youth and sports

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 Rs 10 crore allocated for Mulpani cricket stadium, to be completed within 2 years

 International sports stadium to be constructed in Kathmandu

Private sector investment

 Private sector investment processes to be eased
 One window policy for all information for private sector investment
 Company act, banking act and technology transfer act will be amended and implemented
 Hedging funds will be explored

Governance
 Corruption will be controlled
 Hello Sarkar will be upgraded and brought in all 7 provinces

Law and order

 Supreme court and high court infrastructure will be upgraded
 Free legal services will be provided to people who cannot afford it themselves, violated women and children
 International relations
 International Sagarmatha Conversation will be conducted

National security
 Prisons to be upgraded
 Prison labor to be used in productive sector
 National identity card system to be developed and completed within 2 years
 Emergency fund - Rs 5 arba

Economic plan
 Government staff salary for gazetted officers and non-gazetted officer to be increased by 18% and 20%
respectively and all other incentives and facilities are kept unchanged
 Natural resource exploitation to be stopped
 Tender need to be given after proper supervision

Revenue sources
 VAT rate remains constant
 Slight change in import duties
 One person one PAN is promoted
 Capital Gain Tax (CGT)in share market is decreased to 5%
 Single person earning Rs 4 lakh and Couple earning Rs 4.5 lakh is exempted from income tax
 CGT in Real Estate is decreased to 5% (sub metropolitan) and 10% in (metropolitan)
Liberalization of the Nepalese economy and its effects on the financial and capital market shares

Liberalization refers to the process of eliminating unnecessary controls and restrictions on the smooth functioning of
business enterprises. It includes:
(i) Abolishing industrial licensing requirement in most of the industries;
(ii) Freedom in deciding the scale of business activities;.
(iii) Freedom in fixing prices of goods and services;
(iv) Simplifying the procedure for imports and exports;
(v) Reduction in tax rates; and
(vi) Simplified policies to attract foreign capital and technology.

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A) Effects of liberalization on the capital market sector

1) Nepal Stock Exchange
 Exchange Center Ltd. was established in 1976, under Company Act, 1964
 Nepal Government, under a program initiated to reform capital markets [puji bazaar sudhar lyauna ko lagi SBC baat
NEPSE banaiyo] converted Securities Exchange Center into Nepal Stock Exchange in 1993.
 NEPSE opened its trading floor on 13th January 1994.
 The basic objective of NEPSE is to impart [give, provide] free marketability [bikreyetaa] and liquidity [taraltaa:
assets in the form of cash or easily convertible into cash] to the corporate securities by facilitating transactions in its
trading floor through member such as broker.
 Members of NEPSE are permitted to act as intermediaries in buying and selling of listed corporate securities.
 The tenure of the membership is one year.
 At present, there are 50 member brokers.
 At present, 230 companies have listed their securities to make them eligible for trading.

2) Securities Board of Nepal (SEBON)

 Securities Board of Nepal (SEBON) was established by the Government of Nepal on June 7, 1993 as an apex
regulator of Securities Markets.
 It has been regulating the market under the Securities Act, 2006.
 The major functions, duties and power of SEBON as per Securities Act, 2006 are as follows:
 Provide advice to Government on matters related with the development of capital market.
 Issue necessary securities regulations and directives.
 Register the securities of public companies.
 Regulate and systematize the issue, transfer, sale and exchange of registered securities.
 Issue license to stock broker.
 The Governing Board of SEBON is composed of seven members including one full time chairman appointed by the
Government for tenure of four years.
 The major financial sources of SEBON are the government grant, transaction fee from the stock exchange and
registration fee of corporate securities.

B) Effects of liberalization on the financial sector

Financial sector reform means gradual liberalization of financial market and its players and opening of all types of
depository institutions and other non-depository financial institutions to the private sector. Depository institutions
include commercial banks, development banks, finance companies, co-operative banks etc. The financial sector reform
of Nepal was initiated in mid-1980s and it is still being continued.
 The first phase of the financial sector reform was initiated in mid-1980s under the liberal economic policy of
HMG/N. Under this policy, HMG/N first opened up the banking sector to foreign investors. In 1984, the Nepal
Arab Bank Limited was established as the first joint venture commercial bank of the country. The bank was
established with 50 percent equity participation of a foreign bank. The establishment of this joint venture bank
brought foreign investment in the banking industry and modern banking practices and technical skills.
 After the restoration of democracy, the democratic governments under its open and liberal economic policy gave
more emphasis on the liberalization of the financial sector. As a result, the Nepalese financial sector has grown very
rapidly since 1990s. There has been a dramatic rise in the number of banking and nonbanking financial
institutions.
 Financial sector reforms introduced in the last one and a half decades made significant improvements in certain
sectors such as liberalization of interest rates, creation of a basic regulatory and supervisory frameworks,
development of a longer-term government securities market, secondary market of government securities,
establishment of several types of banking and financial institutions, functioning of stock exchange, competitive
environment in the insurance services due to establishment of more insurance companies etc.
 Commercial banks were allowed, for the first time, to accept current and fixed deposits on foreign currencies (U.S.
dollars and Pound Sterling)

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 NRB regulated the interest rate regime and authorized commercial banks to fix interest rates at any level above its
minimum prescribed levels.
 The liquidity requirement was also lowered.
 Under the Structural Adjustment Program of IMF, the financial sector was further liberalized.
 NRB strengthened its regulation and supervision of banking and financial institutions. Commercial banks were
required to increase their capital adequacy.
 NRB further liberalized the restrictive measures for providing banking and non-banking financial institutions and
especially development banks and finance companies more freedom in their business operation.
Effects of liberalization- emerging business  Rise of financial institutions: The history of financial
environment in Nepal system of Nepal began in 1937 with the establishment
of the Nepal Bank Ltd. as the first commercial bank. A
 Increased private investment in core businesses: major structural change in financial change in financial
Some of the core businesses in Nepal are electricity, sector policies, regulations and institutional
communication, transportation etc. These businesses developments was made in 1980s. Government
were conducted by only by the government before the emphasized the role of the private sector for the
government pursued the liberalization policy. After investment in the financial sector. With the adoption of
liberalization, the private sectors’ investments in these the financial sector liberalization, the door was opened
businesses have grown up significantly. for foreign banks to open joint venture banks in Nepal.
During two decades, Nepal witnessed tremendous
increment in number of financial institutions.
 Increase in FDI: Due to liberalization policy of the  Rise in multinationals: with the liberalization of
government, the foreign direct investment (FDI) has economy, the number of multinationals in Nepal has
increased in Nepal over the years. The government increased rapidly.
has recently promulgated new foreign investment  Rising trade deficits: The external liberalization of
policy, 2015. Its main features are: economy has been a reason of rocketing trade deficit in
 Foreign investments are opened in accountancy, law, the country. It shows the country has not been able to
engineering, film industries and many more which achieve expected benefits through foreign trade
were previously not allowed. liberalization policy.
 Foreign investment is allowed for multi brand
retailing.  Development of capital market: With liberalization,
 Investment in listed securities is opened for foreign Nepal has been providing due importance to capital
institutional investors. market development and expansion. Securities Board
of Nepal has been regulating and monitoring the listed
companies in Nepal. Similarly, Nepal Stock Exchange
limited is involved in over the counter of the security
market.
 Changing role of the government: With  Integration to the world economy: Nepal is the
liberalization of the economy, the role of the member of the regional organizations such as SAARC
government is gradually changing to facilitator from and BIMSTEC. Similarly, it also got the membership
the regulator. The role of government is gradually of WTO. These are the efforts of Nepal to integrate its
shifting to developing infrastructures for economic economy to the global economy.
development. The government has promulgated and  Workforce diversity: With liberalization, workforce
implemented various laws to facilitate the business diversity is increasing in Nepalese organizations. It is
sector. due to changing population dimensions. The workforce
is being diverse over the years due to age, gender and
ethnicity.

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Unit - 6
REGULATORY ENVRIONMENT

CONCEPT OF REGULATORY ENVIRONMENT

Regulatory environment consists of laws and regulations that have been developed by federal, state, and
local governments in order to exert control over business practices. It is a set of laws, regulations, which
influence the business organizations and their operations. These laws work together to ensure
predictability and fairness.

Business law encompasses all of the laws that dictate how to form and run a business. This includes all of
the laws that govern how to start, buy, manage and close or sell any type of business. Business laws
establish the rules that all businesses should follow. A savvy businessperson will be generally familiar
with business laws and know when to seek the advice of a licensed attorney. Business law includes state
and federal laws, as well as administrative regulations.

Legal environment or law can influence on business in relation to property right, protection of intellectual
right, and product safety requirement. Laws differ from country to country. It is essential for future
business leaders and entrepreneurs to have an understanding of the role of the law and legal risk in
shaping business decisions, achieving competitive advantage, and avoiding legal pitfalls.

The main purpose of business legislation in Nepal

 To build up the business in a sustainable way
 To protect the rights of the business as well as consumers
 To encourage the business to follow ethical practices
 To enhance the contribution of the business sector towards national development.

Some business legislation in Nepal

The important legislations that concern the business enterprises include:
1. Private firm registration act, 1958
2. Partnership act, 1964
3. Companies Act, 2006
4. Industrial Enterprise Act, 2016
5. Foreign Investment and Technology Transfer Act, 1992
6. Labor Act, 1992
7. Trade Union Act, 1992
8. Mines and Minerals Act, 1985
9. Intellectual Property Act, 1965
10. Consumer Protection Act, 1998

PRIVATE FIRM REGISTRATION ACT, 2014 (1958)

This act deals with the provisions of registering and operation of private firms engaged in trade and
industry. The following are some of the notable provisions of the act:

a) Application and registration: A person who intends to register a private firm may submit an
application in the format as prescribed to the concerned Department along with the prescribed fee.
Such application shall set out the following particulars:
 The name of the private firm.
 The address of the private firm
 Objectives, functions and the particulars of goods or commodity to be transacted by the private firm.

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 The name and address of the owner, and the name of his/her father, mother and grandfather,
grandmother.
 Other particulars prescribed by the Government of Nepal by publishing a Notification in the Nepal
gazette.

b) Unregistered firms’ transactions are invalid: No transaction shall be valid which is carried out in
the name of a firm which is not registered under this Act.

c) Cancellation of registration: The concerned Department may cancel the registration of a private
firm in the following circumstances:
 If a private firm, which is related with commercial business, fails to effect renewal of the firm within
a prescribed period.
 If the owner of a private firm submits an application to the concerned Department for the termination
of registration of his/her firm upon setting out reasonable reason.
 If it is found that a firm has been registered by providing false particulars.
 If a firm fails to submit the particulars sought by the concerned Department within prescribed period.
 If an industry related private firm closes down operating industry whether providing information
thereof to the concerned Department or not.
 If an industry related private firm fails to renew the industry within a prescribed period from the
expiry of validity period to renew the firm or fails to submit a written progress report on action to be
taken for the construction of factory, purchase of machinery equipment or tools and other acts as may
be required in order to establish and operate the industry as per the condition of the licenses despite
the firm is renewed.
 If a private firm commits any other act in contravention of this Act or Rules framed hereunder.

d) Penalty: The concerned Department shall have discretionary power to impose a fine from Five
Rupees to Fifty Rupees on an owner of a private firm operated without registration and if the owner
again commits the same offence for three times he/she shall be liable to an extra Ten Rupees fine for
each time in the original fine imposed on him/her. If such person commits the same act for fourth
time, no private firm shall be registered in his/her name in the future.

Other penalty includes:

 A person who submits false particulars in the course of submitting an application, the concerned
Department shall, on its discretion, impose a fine from Twenty Five Rupees to Fifty Rupees on
him/her.
 A private firm which fails to provide information to be submitted within the prescribed period, or
provides false information shall be liable to a fine from Twenty Five Rupees to Fifty Rupees in the
discretion of the concerned Department.
 The Government of Nepal may, by publishing a Notification, restrict a private firm which is not
registered or renewed pursuant to this Act, and the bank which transacts with such firm to export and
import any goods.
 A person who is not satisfied with a penalty imposed by the concerned Department may file an appeal
before the Court of Appeal.

PARTNERSHIP ACT, 2020 (1964)

Partnership is defined as any business registered in a record of the Government of Nepal by the persons
who have agreed to share the profit of the business carried on by them in a single name under an
agreement (Kabuliat) made with each other which entitles all partners to take part in all business for each
partner or entitles any of them for the same on behalf of all others. Partnership Act, 1964 highlights the
legal provision on partnership. The following are some of the notable provisions of the act:

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a) Registration and issuance of certificates: A firm shall have to be registered in the record of the
concerned Department within a period of Six months from the date when the partners enter in to the
agreement of partnership pursuant to this Act. The application for registration contains the following
details:
 Full Name of the firm
 The Principal place of business of the firm,
 The objectives of the firm including the short description of the nature of the goods or services, as
the case may be, which the firm intends to run the business,
 The full name, surname and permanent address of the partners,
 The matter of restriction imposed on the power of a partner, if any,
 The types of partnership and the capital subscribed by each partner,
 The name of a partner or partners, who represent the firm,
 The mode to share the profit and loss between /among partners,
 The mode to calculate the profit of a firm. (j) Any other matters prescribed by the concerned
Department stating which should be set out in the application.

If a firm fulfils the conditions, the concerned Department registers such firm pursuant to the Act and
after completing registration, Department issue a certificate (Nissa) of registration.

b) Renewal: An application should be submitted before the concerned Department in the format as
prescribed for the renewal of a firm registered under this Act within a period of Thirty Five days of
the expiry of fiscal year of the firm.

c) Cancellation of registration: The concerned Department may cancel registration of a firm which is
registered under this Act in the following conditions:
 If a firm registered for commercial business fails to cause to effect renewal of the firm within
stipulated time.
 If the partners submit an application to terminate the registration of the firm upon setting out
reasonable reasons thereof to the concerned Department.
 If a firm fails to submit the particulars sought by the concerned Department pursuant to Section 11a
within prescribed period.
 If an industry related firm closes down the operating industry, whether by providing notice thereof to
the concerned Department or not.
 If an industry related firm fails to cause to effect the renewal of the firm within the prescribed time
from the expiry of validity period to renew the firm; or fails to submit the written progress report on
the action as may be required to be taken for the construction of factory, purchase of machinery or
tools or equipment and operation of the industry in order to establish and operate the industry as per
the condition of the license despite the firm has been renewed.
 If a firm commits an act in contravention of this Act or Rules framed hereunder.

d) Mutual relation of partners: The mutual rights and duties of the partners in partnership firm shall be
determined by an agreement made between the partners. Such agreement may be in an express form
or may be implied in the course of mutual dealing.

e) Use of property of the partnership: No Partners shall use or cause to use the property of the
partnership firm for any other purpose other than the purpose of the partnership business.

f) No compulsion for additional capital: No partner shall be compelled to add more capital than the
amount prescribed in the agreement of partnership deed despite the request of other partners. 16. No

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substitution of partners: No partner shall, without the consent of all other partners, make or keep to
any other person as a partner in the firm instead of him/her.

g) Share of profit and loss: In the course of sharing the profit and loss between/among partners it shall
be shared in a manner as referred to in the agreement, if any and it shall be shared on the pro rata
basis if such provision does not exist in the agreement.

h) No entitlement to profit: If a partner fails to pay the capital to be subscribed by him/her to the firm,
he/she shall not be entitled to receive his/her profit until he/she pays the said capital.

i) Liability of a partner: Every partner shall be liable jointly or personally with all the other partners
for all the acts of the firm done while he/she was a partner.

j) No new partner shall be liable: A person who is newly introduced as a partner into a firm shall not
be liable for any act of the firm done before he/she became a partner.

k) Transfer of interest: If any partner transfers his/her interest in the firm by a sale, mortgage or by any
other method to someone else such person may be entitled to claim the profit or any other amount to
be received by the said partner from the business of partnership within that period.

l) Dissolution of firm: Notwithstanding anything contained in the agreement between partners, any
partner may cause to dissolve the firm for specific reasons and particularly in the following
circumstances:
 If a partner has become incapable of performing his/her duties of the firm as referred to in the
agreement; or
 If any other partner fails to pay the amount to be paid to the firm, or if he/she transfers his/her/
interest in the firm to a third party without the consent of all the other partners; or
 If the interest of any other partner is attached (Bhari Bharau) by the court; or
 If a partner commits an act of fraud or an act of serious recklessness in the business of the firm; or
 If a penalty of imprisonment is imposed to any other partner.

COMPANIES ACT, 2063 (2006)

Company Act, 2063 deals with registration, operation and liquidation of company. The following are
some of the notable provisions of the act:

a) Incorporation of Company: Any person desirous of undertaking any enterprise with profit motive
may, either singly or jointly with others, incorporate a company for the attainment of one or more
objectives set forth in the memorandum of association. There shall be a minimum of seven promoters
for the incorporation of a public company.

b) Application to be made for incorporation of company: Any person desirous of incorporating a

company pursuant to Section 3 shall make an application to the Office, in such format and
accompanied by such fees as prescribed, and along with the following documents, as well:
 The memorandum of association of the proposed company,
 The articles of association of the proposed company,
 In the case of a public company, a copy of the agreement, if any, entered into between the promoters
prior to the incorporation of the company,
 In the case of a private company, a copy of the consensus agreement, if any, entered into ,

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 Where prior approval or license has to be obtained from anybody under the prevailing law prior to the
registration of a company carrying on any particular type of business or transaction pursuant to the
prevailing law, such approval or license,
 Where the promoter is a Nepalese citizen, a certified copy of the citizenship certificate and where a
corporate body is a promoter, a certificate of registration of incorporation, decision of the Board of
directors, regulating the incorporation of the company and major documents regarding incorporation.
 Where the promoter is a foreign person or company or body, permission obtained under the
prevailing law to make investment or carry on business or transaction in Nepal,
 Where the promoters is a foreign person, a document proving the country of his citizenship,
 Where the promoter is a foreign company or body, a certified copy of the incorporation of such
company or body and major documents relating to such incorporation.

c) Registration of company: Where an application is made for the incorporation of a company pursuant
to Section 4, the Office shall, after making necessary inquiries, register such company within 15 days
after the date of making of the application and grant the company registration certificate to the
applicant.

d) Limited liability: The liability of a shareholder of a company incorporated under this Act in respect
of its transactions shall be limited on to the maximum value of shares which he has subscribed or
undertaken to subscribe.

e) Number of shareholders: The number of shareholders of a private company shall not exceed fifty.
The number of shareholders of a public company shall be seven in minimum and a maximum of any
number.

f) Terms to be abided by company: An company incorporated under this Act shall abide by the
following terms, in addition to those set forth in this Art, memorandum of association or articles of
association:
 The company shall carry on all of its activities and transactions by its name.
 A private company shall add the words “private limited’’ to its name as the last words and a public
company shall add the word “limited” to its name as the last word. Provided, however, that this
provision shall not apply to a company not distributing profit.
 A private company shall not sell its shares and debentures publicly.
 A private company shall not pledge, or otherwise transfer title to, its securities to any person other
than its shareholder without fulfilling the procedures contained in the memorandum of consensus
agreement,
 A company shall not open a partnership or private firm.
 Except as otherwise provided in this Act, a company not distributing profits shall not distribute
dividends among its members or pay, directly or indirectly, any amount to a member or his/her close
relative.

g) Paid up capital of public company: The paid up capital of a public company shall be a minimum of
ten million rupees, except as otherwise provided in the prevailing law or in a notification by the
Government of Nepal in the Nepal Gazette that the paid up capital of any particular company shall be
in excess of the said required minimum.

h) Conversion of private company into public company: In the following circumstances, a private
company shall be converted into a public company under this section:
 If the general meeting of the private company, by adopting a special resolution, decides to convert
that company into a public company, Provided, however, that no private company shall be capable of

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being converted into a public company unless and until it fulfills the requirements to be fulfilled
under this Act for being a public company
 If twenty five percent or more of the shares of a private company are subscribed by one or more than
one public company, however, that in computing the percentage as referred to in this Clause, the
share passed by any banking or financial company as a trustee shall not be calculated.
 If a private company subscribes twenty five percent or more of the shares of a public company.

i) Conversion of public company into a private company: In the following circumstance, a public
company shall be converted into a private company under this Section:
 If the number of shareholders of the public company becomes less than seven,
 If the public company fails to maintain its paid-up capital.

j) Firm shall be dissolved immediately: A firm shall be dissolved immediately, upon the death of a
partner or upon the adjudication of a partner as an insolvent for being unable to pay back the debt of
the creditor.

INDUSTRIAL ENTERPRISE ACT, 2016

The Industrial Enterprises Act 2073 (2016) (“IEA”) has been enacted on November 22, 2016 to replace
the previous Industrial Enterprise Act 2049 (1992).It deals with the registration, operation, facilities and
dissolution of industries in Nepal. The following are some of the notable provisions of the act:

a) Registration: All industries shall be operated only upon registration with the Department of
Industry. In case of minor or cottage industries, the registration may be within 6 months from the
commencement of operation.

b) Environmental compliances: Pursuant to the Act, industries should commence activity related to
establishment and operation of industries only after completion of applicable environment studies.
This provision provides for much needed clarity as there were certain practical difficulties where
environmental clearance required prior to registration of the industry.

c) No work no pay: This act has the provision of no work no pay system which has been a major
demand of the country’s private sector. It has provisioned non-distribution of salary during the period
of no work.

d) One window policy: This Act has introduced the “One window policy” to provide the services of
Department of Industry in convenient and easy way. The Act has also incorporated provision to
register complaints directly to the Ministry if the concerned authorities delay in registering industries
in stipulated time.

e) Tax exemption: This act has given income tax exemption for up to five years to hotels, resorts and
other businesses related to tourism established in the places other than metropolitan and sub-
metropolitan cities.

f) Mandatory CSR: This act has made mandatory for businesses making turnover of Rs. 150 million
yearly to spend one percent of their profit on corporate social responsibility.

FOREIGN INVESTMENT AND TECHNLOGY TRANSFER ACT, 1992

Foreign investment and technology act, 2048 (1992) deals with the procedures of foreign investment and
technology transfer. Its main purpose is to promote foreign investment and technology transfer for
making the economy viable, dynamic and competitive through the maximum mobilization of the limited

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capital, human and the other natural resources. The following are some of the notable provisions of the
act:
a) Permission to be obtained: A person desiring to avail the foreign investment or technology transfer
shall be required to make an application to the Department in the prescribed form along with the
prescribed particulars for obtaining permission in that behalf. Department shall, in the case of an
industry with fixed assists up to five hundred million rupees, itself, and in the case of an industry with
fixed assets in excess thereof, in accordance with the decision of the Board, grant permission within
thirty days from the date of application.

b) Repatriation facility: A foreign investor making investment in foreign currency shall be entitled to
repatriate the following amount outside Nepal:
 The amount received by the sale of the share of foreign investment as a whole or any part thereof.
 The amount received as profit or divided in lieu of the foreign investment.
 The amount received as the payment of the principal of and interest on any foreign loan.

c) Provisions for visa: A foreign national visiting Nepal in connection with undertaking any study or
carrying out any research with the objective of making investment in Nepal shall be provided a non
tourist visa for up to six months.

A foreign investor or dependent family or authorized representative of such a foreign investor and
department family of such authorized representative shall for the purpose of stay in Nepal be provided
a business visa until the foreign investment is retained.

Provided that a foreign investor who, at a time, makes investment in an amount no less than one
hundred thousand United States dollar or in convertible foreign currency equivalent thereto, and
his/her dependent family shall be granted a residential visa until such investment is retained.

d) Settlement of disputes: If any dispute arises between a foreign investor, national investor or the
concerned industry, the concerned parties shall be required to settle the dispute by mutual
consultations in the presence of the Department. If the dispute could not be settled in the manner, it
shall be settled by arbitration in accordance with the prevailing arbitration Rules of the United
Nations commission on International Trade Law (UNCITRAL).

LABOR ACT, 1992

Labour Act, 2048 (1992) deals with appointment, remuneration working conditions and other terms and
rules regarding labour in Nepal. The following are some of the notable provisions of the act:

a) Appointment of worker and employee: In cases where it is required to appoint a worker or

employee in any post, the Manager should advertise in order to select such a worker or employee and
the worker or employee so selected have to be provided with appointment letter and be engaged at
work.

b) Prohibition of engaging non-Nepalese citizens at work: Non-Nepalese citizens should not be

permitted to be engaged at work in any of the posts. If a Nepalese citizen could not be available for
any skilled technical post even after publishing an advertisement in national level public newspapers
and journals, the Manager may submit an application to the Department of Labour along with the
evidence of such fact for the approval to appoint a non-Nepalese citizen. Department of Labour may,
on the recommendation of the Labour Office, grant approval to engage a non-Nepalese citizen at
work years for a maximum period of up to five years not exceeding two years at a time and, in the
specialized kind of skilled technical post, for a period up to seven years.

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c) Security of Service: The service of any permanent worker or employee may not be terminated
without following the procedures prescribed by this Act or the Rules or Bylaws made under this Act.

d) Compulsory retirement: The Proprietor may compulsorily retire any worker or employee who has
crossed the age of fifty five years. Provided that he/she may extend the period of service of any
worker of employee by five years, in case the worker or employee is indispensable for the operation
of the functions Enterprise.

e) Working hours: No worker or employee shall be deployed in work for more than eight hours per day
or forty eight hours per week and they shall be provided one day as weekly holiday for every week.

f) Extra wages for overtime to be provided: Where any worker or employee is engaged to work for
more than eight hours in a day or forty eight hours in a week, he/she should be paid overtime wages at
the rate of one and one-half time of his/her ordinary rate of wages.

g) Minimum remuneration fixation committee: Government of Nepal may fix the minimum
remuneration, dearness allowances and facilities of workers or employees or Enterprises on the
recommendation of the Minimum Remuneration Fixation Committee and the notification on rates so
fixed shall be published in the Nepal Gazette.

h) Period of remuneration: The Proprietor may fix the period of payment of remuneration to the
workers or employees on weekly, fortnightly or monthly basis in way not exceeding the period of one
month.

i) Welfare fund: The Enterprise shall have to establish a Welfare Fund, as prescribed for the welfare
and benefit of the workers or employees.

j) Compensation: In case any worker or employee of the Enterprise is physically wounded or seriously
hurt or dies in course of his/her work, the compensation should be paid to him/her or to his/her
family, as prescribed.

TRADE UNION ACT, 1992

Trade Union Act, 2049 (1992) deals with the legal provision regarding registration, operation of Trade
Union and other necessary provisions relating to it for the protection and promotion of professional and
occupational rights of the persons engaging in self-employment and the workers working in various
industry, trade, profession or service in enterprises or outside the enterprises. The following are some of
the notable provisions of the act:

a) Registered of trade union: The act has made the provision of registration of trade unions at different
levels:
 Registration of enterprise level trade union: The workers of concerned enterprise may constitute an
Enterprise Level Trade Union to protect and promote their occupational rights. In order to register an
Enterprise Level Trade Union constitute an application in the prescribed form signed by at least ten
members of the Trade Union as designated by the working committee along with the Constitution of
the Trade Union, prescribed fee and other prescribed particulars should submit to the Registrar. The
Registrar should after receiving an application if finds complied with the Act, should register the
Trade Union within 15 days from the date of receipt of application or from the date of receipt of
additional particulars as requested and provide certificate to the applicant in the prescribed form.

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 Registration of trade union association: At least fifty enterprise Level's Trade Union or five
thousand Agriculture Laborers of at least twenty districts comprising one hundred persons from each
district or Five thousand workers of similar nature Enterprise, may constitute a Trade Union
Association by mutual agreement.

 Registration of the Trade Union Federation: At least ten Trade Union Association may constitute a
Trade Union Federation by mutual agreement.

b) Autonomous and Corporate body: The Trade Union shall be an autonomous and corporate body
having perpetual succession.

c) Objectives: The objectives of the Trade Union are as follows:

 To engage in economic and social development of the workers by improving their working
conditions.
 To make an effort to establish good relationship between worker and management.
 To assist in the development of Enterprise by increasing the productivity of Enterprise.
 Try to make the workers dutiful and disciplined.

d) Recognition of the Authorized Trade Union: The Authorized Trade Union shall be recognized for
the collective bargaining with the management on behalf of the workers of authorized enterprise level
Trade Union.

e) Fund: The Trade Union shall have its own separate fund and the fund shall contain the following
amounts:
 The amount obtained from the national fee.
 The amount obtained from the national organizations in the form of Aid or Grant.
 The amount obtained from any other sources.

MINES AND MINERALS ACT, 1985

Mines and mineral act, 2042 (1985) deals with the identification, excavation and other administrative
procedures related to mines and minerals in Nepal. The following are some of the notable provisions of
the act:
a) Property of Government of Nepal: All minerals lying or discovered on the surface or underground
in any land belonging to an individual or the government within Nepal shall be the property of the
Government of Nepal.

b) Classification of minerals: For the purpose of this Act, the minerals shall, on the basis of nature and
importance of minerals, be classified as follows:
 Classification on the basis of nature of the minerals:
 Metallic minerals, and
 Non-metallic minerals
 Classification on the basis of importance of minerals:
 Very precious minerals
 Precious or valuable minerals
 Ordinary minerals

c) Power to carry out the mining operations: Government of Nepal shall have the exclusive power
(authority) to carryout mining operations. The Department may undertake mining operations by itself
or it may cause to undertake by any person having issued a license, subject to this Act. Government

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of Nepal shall have the power (authority) to be a partner in mining operations by investing capital
there for or otherwise.

d) Environmental effect: The person undertaking mining operations shall, in undertaking mining
operations, have to undertake it without causing significant adverse effect on environment. Likewise,
a person undertaking such operations shall have to adopt protective measures as prescribed on
environmental protection.

e) License for the mining operations: Any person desirous to undertake mining operations, subject to
this Act and the Rules framed hereunder, shall submit an application in the prescribed format to the
Department for obtaining a license. The Department shall, after receiving an application, make
necessary inquiries and may grant a license for mining operations in the format and charging fees as
prescribed

f) Royalty: The licensee shall pay royalty and other charges as prescribed to the Department on the
basis of the category, quality, and quantity of the minerals.

g) Inspection and investigations: The Department may authorize any expert, authority or agency to
inspect and investigate whether or not mining operations have been undertaken in accordance with
this Act and the Rules framed hereunder.

h) Penalties: Government of Nepal may in case any person undertakes mining operations without
obtaining a license under this Act, stop such mining operations, seize the machinery equipment,
instruments and goods used for such mining operation including the minerals explored in an
unauthorized manner, and punish such a person with a fine not exceeding One Hundred Thousand
Rupees and also cause to recover compensation for the property lost or damage resulting from such
operations.

INTELLECTUAL PROPERTY- PATENT, DESIGN AND TRADEMARK ACT, 1965

Patent, Design and Trademark Act, 2022 (1965) deals with legal provisions related to the patents, designs
and trademarks. Its main purpose is to update the legal arrangements in respect to patents, designs and
trade marks for the convenience and economic benefit of the general public. The following are some of
the notable provisions of the act:

Patent Act, 2022 (1965)

 Application: A person desirous of having any patent registered in his/her name should submit
application to the Department containing the particulars mentioned below:
 Name address and occupation of the parson inventing the patent.
 If the applicant him/herself is not the inventors, how and in what manner he/she acquired title thereto
from the inventor.
 Process of manufacturing, operating or using the patent.
 The theory or formula if any, on which the patent is based.

Along with the application, applicant should also submit map and drawings along with particulars, of
the patent, as well as the fee specified.

b) Registration of patent: On receipt of applications filed for registration of a patent, the Department
shall, after completing necessary investigations issue a registration certificate in a format as specified
to the applicant.

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Registered patents to be published: Patents registered under this Act, other than those which must
be kept secret in the national interest, shall be published by the Department in the Nepal Gazette for
the information of the public.

c) Term of patent: The title of the patentee to the patent shall be valid only for a period of seven years
from the date of registration.

d) Penalty for violation: A person, who commits any of the acts, shall be fined as per gravity of offense
by the order of the Department and the goods or commodities related to the offense shall be
confiscated :
 A fine of up to Five Hundred Thousand Rupees for committing an offense.
 A fine of up to Two Hundred and Fifty Thousand (Two lakhs fifty thousand) Rupees for committing
an attempt or abetment of an offense.

Design Act, 2022 (1965)

 Application: A person desirous to register the design of any article manufactured or caused to be
manufactured should submit application to the Department in a formats as specified along with four
copies of such design and maps, and drawings and particulars thereof.

 Registration: On receipt of the application filed by any person, the Department registers the design
in the name of the applicant and issue a certificate.

 Term of Design. The title of the person in whose name a design has been registered remained valid
for a period of five years from the date of registration thereof, except when it is renewed

 Punishment: No one can copy or use the design without transferring the ownership or written
permission. If a person does so, a fine not exceeding fifty thousand rupees may be imposed, and
articles and goods connected with such offense can be confiscated.

Trade Mark Act, 2022 (1965)

 Application: A person desirous to register the trademark of his business should submit application to
the Department in a prescribed format along with four specimens of such trade-marks.

 Registration of trademark: The department registers the trademark in the name of the applicant
after necessary investigation.

 Time Limit for Use of Trade-marks: In case a trade-mark registered at the Department is not
brought into use within one year from the date of registration thereof, the department shall conduct
necessary inquiries and cancel such registration.

 Term of Trade-Marks: The title of the person in whose name a trade-mark has been registered shall
remain valid for a period of seven years from the date of registration thereof, except when it is
renewed.

 Punishment for illegal use of trade-marks: May be punished with a fine not exceeding is One
Hundred Thousand Rupees and articles and goods connected with such offense confiscated on the
orders of the Department as per the gravity of offense.

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 [BEN] Binod Lingden Subba

CONSUMER PROTECTION ACT, 1998

Provisions of the Consumer Protection Act, 2054 (1998) protect consumers from irregularities such as
the quality, quantity and prices of consumer goods or services; ensuring that no one lowers or
removes the attributes or usefulness of consumer goods or services; preventing circumstances in
which monopolies and unfair trading practices may lead to an increase in prices, as well as false and
misleading propaganda about the use and usefulness of consumer goods or services.

The following are some of the notable provisions of the act:

a) Formation of Consumer Protection Council: Consumer Protection Council is formed in order to
formulate policies relating to the protection of the rights and interests of consumers, and offer
suggestions to Government of Nepal on matters concerning the rights and interests of consumers.

The functions, duties and powers of the Council shall be as follows:

 To offer suggestions to Government of Nepal on matters relating to the protection of the rights and
interests of consumers, the supply system and prices, quality and purity of consumer goods and
services.
 To disseminate or cause to disseminate information relating to the rights and interests of consumers in
order to inform them about the standard of goods and services so as to protect them in matters
concerning consumer goods and services.
 To inform or cause to inform consumers about the prices, quality, quantity and purity of consumer
goods and services, as well as about unfair trade.
 To conduct or cause to conduct studies in connection with the protection of the rights and interests of
consumers.
 To offer suggestions to Government of Nepal on changing the existing policies or framing new
policies relating to the protection of the rights and interests of consumers.
 To maintain or cause to maintain updated national and international information relating to the
protection of the rights and interests of consumers.
 To monitor or cause to monitor the rights of consumers and offer suggestions to Government of
Nepal to rectify the shortcomings noticed in the course of such monitoring.
 To discharge or cause to discharge the functions prescribed by Government of Nepal.
 To discharge or cause to discharge such other functions as are deemed appropriate for the protection
of the rights and interests of consumers.

b) Protection and Promotion of Consumer Rights: For the purpose of protecting the rights and
interests of consumers, every consumer shall have the following rights:
 Right to be protected from the sale and supply of consumer goods and services which may harm life,
body, health and property.
 Right to be informed about the prices, attributes, quantity, purity, quality, etc. of consumer goods and
services so as to be safe from unfair trade practices.
 Right to be assured of an opportunity to choose consumer goods and services at competitive prices as
far as possible.
 Right to be assured that an appropriate agency will hear matters concerning the protection of the
rights and interests of consumers.
 Right to be heard and compensated against exploitation and grievances....... hardships resulting from
unfair trade practices.
 Right to consumer education.

c) Particulars to be Mentioned in Consumer Goods: A producer shall compulsorily mention the

following particulars on the labels of consumer goods:

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 [BEN] Binod Lingden Subba

 Name and address of the producer, and registration number of the industry.
 In the case of consumer goods such as food and medicines, their ingredients as well as their quantity
and weight.
 Quality of consumer goods whose quality has been determined, if any.
 Method of consuming consumer goods and possible impact of such consumption.
 Price, batch number, production date and expiry date of the consumer goods.
 In the case of consumer goods such as electronic goods, hardware and machinery, guarantee thereof,
date of guarantee, and other necessary matters.
 In the case of consumer goods which are inflammable, dangerous or fragile, precautions for their
safety.
 Other particulars as prescribed.

d) Standard of Consumer Goods or Services: In case the limits of the quality or quantity of any
ingredient to be used in any of the consumer goods or services, Government of Nepal shall determine
the standard of such good or service according to the prescribed procedures.

e) Price Lists to be Kept: Every vendor shall keep at a conspicuous place of shop a price-list of all
consumer goods sold and supplied by him/her, explicitly mentioning its wholesale and retail prices.

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