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Industries in Bagmati Province are operating at just 41.08 percent of their installed capacity due to unreliable electricity, rising production costs and dependence on imported raw materials and fuels, according to a Nepal Rastra Bank (NRB) report.

The Economic Activities Study Report of Bagmati Province for FY 2025/26, released on Tuesday, found that frequent power disruptions and voltage fluctuations have forced industries to rely on costly alternative energy sources.

Industrial capacity utilization increased by 3.59 percentage points from 37.49 percent in the previous period. However, factories continue to operate at less than half of their total capacity. The noodle industry recorded the highest capacity utilization, while the ointment industry under the other chemicals category reported the lowest.

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

The report also cited high production costs, shortages of skilled workers, shrinking markets, limited use of modern technology and delays in rebuilding roads damaged by natural disasters as major obstacles to industrial growth.

Despite these challenges, Bagmati Province’s economy is estimated to grow by 5.40 percent in FY 2025/26, exceeding the national growth estimate of 3.85 percent.

The province’s GDP at current prices is projected at Rs 2.423 trillion, accounting for 36.71 percent of Nepal’s estimated total GDP of Rs 6.6 trillion, making Bagmati the country’s largest provincial economy.