West Asia Tensions Impact Hetauda Industrial Zone, Threatening Production and Operations

Makwanpur. The escalating tensions in West Asia are beginning to have a global impact. The effects of the West Asia conflict are now visible in the Hetauda Industrial Zone, which is Nepal's largest industrial area.

Despite being geographically distant from the conflict zones, Nepali industries, which rely on international markets for raw materials and fuel, are facing a crisis due to current supply chain disruptions.

According to the Hetauda Industrial Zone Management Office, 126 out of 147 plots have operational industries. Four industries are under construction, while the remaining plots house public institutions. The office stated that even the currently operating industries are unable to produce at full capacity.

Specifically, the unexpected rise in the price of petroleum-based raw materials and disruptions in the supply chain have pushed Hetauda industrialists to the brink of production cuts or even shutting down their industries altogether.

Industrialists report that the impact on the import of everything from plastic pellets to wheat required for food items has led to artificial shortages and price hikes in the market, while simultaneously increasing the challenges of running industries. If the situation persists for the next month, most industries will shut down due to a lack of raw materials, according to industrialists.

They state they are caught in a double bind: rising international fuel prices are causing transportation costs to skyrocket, and power shortages necessitate running industries using expensive diesel generators.

Swagat Raj Pyakurel, Vice President of the Federation of Industry, Bagmati Province, and an industrialist, noted that Nepali industries are facing numerous challenges due to rising international tensions and economic instability. He mentioned that production sectors are being affected by the recent availability of raw materials, unexpected price increases, and obstacles in the smooth supply of fuel.

Pyakurel stated that due to industries shutting down or having to cut production because of the conflict, they are forced to bear losses exceeding NPR 30 million daily. He added that the price of plastic pellets used for packaging has nearly doubled compared to January or February.

Pyakurel asserted that paint industries, along with plastic-based industries, are also in trouble. Since the emulsion and other raw materials needed to make paint are petroleum-based, their prices have increased, and their market availability is also decreasing.

'Electricity is interrupted for up to 10.5 hours in the Hetauda Industrial Zone. In such a situation, running industries via generators using expensive diesel further increases costs. The rise in diesel prices has also directly impacted transportation,' Pyakurel said.

Pyakurel emphasized that the government must play a diplomatic and proactive role in ensuring the smooth management of petroleum products and fuel to resolve the current problems.

He clarified that if banks provide some relief in interest rates and ease payment processes, industrialists would be able to secure raw materials in time. He also pointed out the need for timely reform and change in the role of the Industrial Area Management Limited, which has been operating under the same outdated structure for 60 years.

Pyakurel stated that the government must take the deteriorating industrial environment, caused by negative market sentiment, seriously.

Badri Nath Sharma, Chairman of the Industry Association Makwanpur, said that the impact of international conflict has brought Hetauda's industries to the verge of collapse.

According to Sharma, since the industries in the Hetauda Industrial Zone are entirely dependent on imported raw materials, external conflicts are directly affecting production. He noted that plastic industries, which primarily use petroleum-based raw materials, have been the most affected.

Chairman Sharma also highlighted that food industries are in crisis. Due to the lack of domestic raw materials, even wheat for flour mills has to be imported from foreign countries, he stated.

'There are about 28 to 32 plastic industries in Hetauda. Since plastic pellets are derived from petroleum products, any increase in international fuel prices directly impacts Hetauda's industries,' Sharma said. 'Major traders in Nepal have already increased the price of raw materials by 50 to 55 percent using this as an excuse and have started creating artificial shortages in the market.'

Sharma stated that if the current situation prolongs, many industries in Hetauda will face closure. He clarified that the disruption in the raw material supply chain due to external obstacles has increased the risk of industrial production cuts and economic recession.

Sharma mentioned that the Industry Association Makwanpur is informally communicating and consulting with higher bodies like the Federation of Industry and other federations regarding this matter.

Industries Facing Closure Due to Raw Material Shortage: Kunwar

Sangeeta Kunwar, Area Manager of the Industrial Area Management Office Hetauda, stated that industries are reaching a point of closure due to the shortage and price hike of raw materials.

She mentioned that industries dependent on raw materials imported from foreign countries, especially plastic industries, have been the most affected.

'Plastic pellets have to be imported from abroad. Looking at the current situation, the existing stock with the industries can sustain production for only 15 days to a maximum of one month,' she said. 'The production process has become expensive due to the rise in international fuel prices and the increasing cost of raw materials.'

Kunwar clarified that since most industries in the Hetauda Industrial Zone rely on raw materials coming from third countries, this problem is not limited to plastics but is also appearing in other sectors, including food.

According to her, out of a total of 147 industries in the Hetauda Industrial Zone, 126 are operational. She stated that even these industries are currently unable to operate at their full capacity.

Kunwar noted that some industries are operating at only 40 to 50 percent capacity. She mentioned that the decline in production will directly affect employment in the coming days.

Kunwar stated that the office is coordinating with higher authorities to resolve the crisis in the industrial sector. 'We are informally informing the center and the ministry about the situation. After observing the situation for a few more days, we will initiate the formal process of lobbying the Ministry of Industry and the relevant regulatory bodies for policy reforms,' she said.