Bagmati Province Industries Use Just 41 Percent of Capacity with High Energy Cost

Kathmandu: Industries in Bagmati Province are operating at just 41.08 percent of their installed capacity, mainly due to unreliable electricity supply and dependence on expensive imported fuels.

According to the Economic Activities Study Report of Bagmati Province for FY 2025/26, released by Nepal Rastra Bank (NRB) on Tuesday, industries in the province have been facing frequent power disruptions and voltage fluctuations. The report says poor-quality electricity supply has forced industries to rely on more expensive alternative energy sources.

Industrial capacity utilization increased by 3.59 percentage points during the review period, rising from 37.49 percent to 41.08 percent. Despite the improvement, industries are still operating at less than half of their installed capacity.

Among the industries covered by the study, the noodle industry recorded the highest capacity utilization, while the ointment industry under the other chemicals category recorded the lowest.

The industries surveyed employ 8,232 people, including 8,124 Nepali and 108 foreign workers.

The NRB study identified several factors behind the low capacity utilization, including dependence on imported raw materials and fuel, high production costs, a shortage of skilled workers, a shrinking market and limited adoption of modern technology. Delays in rebuilding roads damaged by natural disasters have also disrupted the transportation of raw materials and the distribution of manufactured goods.

Meanwhile, Bagmati Province’s economic growth rate is estimated at 5.40 percent in FY 2025/26, significantly higher than the national average of 3.85 percent.

The province’s GDP at current prices is estimated at Rs 2.423 trillion, accounting for 36.71 percent of Nepal’s total GDP of Rs 6.6 trillion. Bagmati continues to make the largest contribution to the country’s economy among all seven provinces.