DISTRIBUTION MANAGEMENT IN NEPAL

 By
SHRUTI GAUTAM

BBA Program

 
T.U Registration No: 7-2-3-388-2017

A Project Work submitted to

Faculty of Management, Tribhuvan University

In partial fulfillment of the requirement for the degree of

Bachelor of Business Administration

At the

Kantipur College of Management and Information Technology

Mid Baneshwor, Basuki Marga, Kathmandu

Tribhuvan University

1|Page
 STUDENT DECLARATION

I hereby declare that I have completed the Project work entitled “Distribution
Management in Nepal” submitted to Kantipur College of Management and
Information Technology affiliated with Tribhuvan University is an original
work done under the supervision of Mr. Prajwal Man Shrestha, BBA faculty
and is submitted in partial fulfillment of the requirements for the degree of
Bachelor of Business Administration (BBA).

Signature:
Name: Shruti Gautam
Date:
 

2|Page
 CERTIFICATE FROM THE SUPERVISOR
This is to certify that the summer Project report entitled “Distribution
Management in Nepal ” is an academic work done by “Ashmi
Neupane” submitted for the partial fulfillment of the requirements for the
degree of Bachelor of Business Administration at Faculty of Management,
Tribhuvan University under my guidance and Supervision.

Signature of the Supervisor

Name: Prajwal Man Shrestha

Designation: Lecturer, KCMIT

Date:

3|Page
 ACKNOWLEDGMENT

The research entitled "Distribution Management in Nepal" has been prepared

to satisfy the partial fulfillment for Bachelor of Business Administration
(BBA) under the program of Kantipur College of Management and
Information Technology affiliated with Tribhuvan University. I would like to
express my special gratitude to college principal mam Mrs. Lalita Chand.
Similarly, I would like to extend my deepest gratitude to our module leader
Mr.Prajwal Man Shrestha sir for his support, encouragement, motivation,
and help throughout the project work.

Lastly, I take this opportunity to thank my friends who chipped-in with some
valuable suggestions for the betterment of this project work

If any mistakes are found in this report I am very extremely sorry for that.

Thank you

4|Page
Contents

Introduction to Distribution Management………………………………………….....……..6

Chapter-1 Distribution Channel in Nepal…………………..…….………………………….7

Chapter-2 Mode of Transportation in Nepal…………………………………….…………..,8

Chapter-3 Role of Government sector in Distribution Management………………...……..12

Chapter-4 Role of wholesaler and retailer in distribution channel…………………………15

Chapter-5 Problems and challenges in Distribution Management of Nepal………………..16

References…………………………………..………………………………………………17

5|Page
 Introduction to Distribution Management

Distribution management refers to the process of overseeing the movement of

goods from supplier or manufacturer to point of sale. It is an overarching term
that refers to numerous activities and processes such as packaging,
warehousing, supply chain, and logistic. Mainly the distribution of products
takes place by means of a marketing channel, also known as a distribution
channel. A marketing channel is the people, organizations, and activities
necessary to transfer the ownership of goods from the point of production to
the point of consumption. It is the way products get to the end-user, the
consumer. This is mostly accomplished through merchant retailers or
wholesalers or, in the international context, by importers. In certain specialist
markets, agents or brokers may become involved in the marketing channel.
Typical intermediaries involved in distribution include:

 Wholesaler: A merchant intermediary who sells chiefly to retailers, other

merchants, or industrial, institutional, and commercial users mainly for
resale or business use. The transactions are B2B (Business to Business).
Wholesalers typically sell in large quantities. (Wholesalers, by definition,
do not deal directly with the public).
 Retailer: A merchant intermediary who sells direct to the public. There are
many different types of retail outlet - from hypermarts and supermarkets to
small, independent stores. The transactions in this case are B2C (Business
to Customer).
 Agent: An intermediary who is authorized to act for a principal in order to
facilitate exchange. Unlike merchant wholesalers and retailers, agents do
not take title to goods, but simply put buyers and sellers together. Agents
are typically paid via commissions by the principal. For example, travel
agents are paid a commission of around 15% for each booking made with
an airline or hotel operator.
 Jobber: A special type of wholesaler, typically one who operates on a
small scale and sells only to retailers or institutions. For example, rack
jobbers are small independent wholesalers who operate from a truck,
supplying convenience stores with snack foods and drinks on a regular
basis

6|Page
 CHAPTER -1

Distribution Channel in Nepal

A distribution channel is a chain of businesses or intermediaries through

which a good or service passes until it reaches the final buyer or the end
consumer. Distribution channels can include wholesalers, retailers,
distributors, and even the internet. Distribution channels are part of the
downstream process. As this topic is about distribution channel in
Nepal so let’s move on towards distribution channel in Nepal. In Nepal
most of the manufacturers use conventional channel. Wholesalers and
the retailers are the major channel members.89% of the people use two-
level channel. Agents are mostly used for imported products, insurance,
manpower, advertising, and education consultancy. Local/smaller
producer use direct channel. Services are distributed through direct
channel. Independent channel members dominate the direct channel.
Wagon/Jobbers are increasing in rural and urban areas. Convenience
stores still dominate the retail chain. No use of supply chain. Channel
conflicts are common in Nepalese channel members. Some of the
reasons for increase of channel conflicts are given below:

1. Unclear Roles

2. Perpetual Difference

3. Financial Matters

4. Goal Difference

5. Lack of Training and Motivation

7|Page
 Chapter-2
Mode of transportation in Nepal

Nepal is a landlocked country, with India and China forming land borders with
the country. Nepal transport system consists of the modes of travel in the
country. Since the country is mostly mountainous and has a rough and rugged
terrain, transport system in Nepal is an interesting phenomenon. Due to the
landscape of the country, roadways and airways are the only modes of
transport in the country.
2.1 Containers
Nepal is a land-locked country and relies on the Port of Kolkata in India for
handling practically all its sea freight imports, where the Government of Nepal
also owns a Container Freight Station (CFS) at the Kolkata Dry Port which has
the capacity to store 500 containers. Nepal has multiple dry ports, of which the
Birgunj Dry Port is the largest in terms of annual volume of cargo and income
from customs duties and taxes. The Nepal Intermodal Transport Development
Board (NITDB) is the public private partnership (PPP) entity that develops,
manages and promotes Inland Clearance Depots (ICD’s*) for the facilitation of
Nepal’s exports and imports.  Currently, there are four dry ports in operation:
Birgunj ICD at Sirsiya, Bhairahawa ICD, Biratnagar ICD and Kakarvitta ICD.
These ICD’s have only road-based links except Birgunj ICD which, in addition
to road, is rail linked with the Port of Kolkata via Raxaul. 
The Inland Clearance Depot (ICD) at Sirsiya, Birgunj is the first (and
only) terminal in Nepal linked by rail-road to India. On 6 July 2004, NITDB
awarded Himalayan Terminal Pvt Ltd the contract to operate and manage the
Inland Clearance Depot in Sirsiya. It facilitates the direct movement of
containers and break-bulk cargo from Kolkata port and other places in India. It
has six full-rake railway sidings. It handles more than 20,000 TEU (Twenty-
Foot Equivalent Unit) annually. It can store up to 1,568 TEU. It has been
constructed on 38 ha (94 acres) land.  

2.2 Railways

8|Page
Currently there are two operational railway lines in the country:

Raxaul–Sirsiya line: This is a 6 km (3.7 mi) line from Raxaul, India

to Sirsiya Inland Container Depot (or dry port) near Birganj, Nepal, and is
primarily used for freight transport. It allows container traffic to be imported to
Nepal through the Sirsiya dry port container depot.
Jaynagar–Janakpur line: This is a 28 km (17 mi) line from Jaynagar, India
to Janakpur, Nepal, and is used primarily for passenger transport.
Railway Department has following lines under planned railways to be develop in future.

 East-West Railway or Mechi-Mahakali Railway: The railway feasibility study has been
done with total of 945.244 km (587.347 mi) which will expand through 24 districts in
the total cost of $3 billion.
 Anbu Khaireni-Bharatpur- The feasibility study has done and railway will be
constructed to link Kathmandu and Pokhara with the Mechi-Mahakali or the East-West
Railway.
 Jainagar-Janakpur–Bijayalpura-Bardibas: The Jainagar–Janakpur line is being extended
further to Bardibas from Janakpur.
 Kerung-Kathmandu: The railway will connect the capital city with China and the
estimated cost is $2.75 billion. A 23-member technical and administrative team of
National Railway Administration of China, led by its vice minister Zheng Jian
contucted a four-day overall study.
 Lumbini-Pokhara-Kathmandu: This will connect the popular tourist destination and
adventureous city with the capital and the estimated cost is $3 billion.
 Raxall–Birgunj-Kathmandu: Nepal and India agreed to construct a railway line linking
Raxaul with Kathmandu during Prime Minister KP Oli Sharma's visit to India. A team
of technical officers visited Kathmandu to study the proposed railway and they have
stated that a feasibility study of the project would begin. They have already
identified Chobhar as the terminus of the 113 km long railway line.
 New Jalpaiguri (India) – Kakarbhitta (Nepal)
 Bathnaha (India)- Jogbani (India) – Biratnagar (Nepal)
 Nautanwa (India) – Bhairahawa (Nepal)
 Rupaidiha,Nepalganj Road (India) – Nepalganj (Nepal)

2.3 Trucks and Lorries

According to the types of road and also the types of goods and conditions
different types of trucks vary in size i.e. ultra-light, very light,
light ,medium ,heavy and off-road. List of truck types is intended to classify
trucks and to provide links to articles on the various types. The three main
classifications for road truck by weight are light trucks, medium trucks, and
heavy trucks. Above this there are specialized very heavy trucks and
transporters such as heavy haulers for moving oversized loads, and off-road

9|Page
heavy haul trucks used in and mining which are too large for highway use
without escorts and special permits.

2.4 Ropeways (including cable-cars)

Ropeway in Nepal, which mainly refers to the aerial ropeways, are used for
human and cargo transport. In the ‘Nepal Country Report’ of 1976 by the
world bank concluded that construction and maintenance of roads in
mountainous are costly due to hilly terrain, and thus other means of transport
should be studied mainly indicating to the ropeways. However, ropeways have
not gained significant popularity over roadways. In the Ninth Five-year Plan
ropeway was encouraged with and involvement of the private sector. But no
provision in the national budget was made for ropeway development.
Nonetheless, private sector has initiated the construction and operation of
ropeways mainly in lucrative places such as religious temple. The first
ropeway to carry cargo was Halchowk-Lainchour ropeway which was used to
transport stones from the quarry to build palaces. The famous, Dhorsing-
Chisapnai-Chandragiri ropeway passing into Kathmandu was built by Chandra
Shamser Rana in 1922. It was upgraded in 1964 to reach to Hetauda with a
total length of 42 km with technical and financial assistance from USAID.

Tar pul or Ghirling

Also known as twin, this kind of ropeways are rudimentary ropeways that are
used as a bridge to cross the river. These are generally made by the local
community based on necessity. As of May 2004, there are 25 Tar Pul in Kavre,
Gorkha, Myagdi, Udaypur, Chitwan and Lamjung

Gravity Ropeways

Gravity ropeway operates by using potential energy without electricity. A

certain weight is dropped from higher elevation which pulls the smaller cargo
from lower elevation to higher elevation. This kind of ropeways was first used
in Mustang to transportation apple. Since then it has made its way to four other
locations, Gorkha, Tanahun, Kalikot and Achham. Most of the construction
ropeways fall in this category.

Cargo Ropeways

Cargo ropeways are used in Nepal to transport goods from one place to
another. The first ropeway, Halchowk-Lainchour, was in fact a cargo ropeway.
The most famous cargo ropeway was the Kathmandu-Hetauda Ropeway which
is now out of operation.

10 | P a g e
Passenger ropeways

Mostly electrically operated, these kinds of ropeways, also called Cable Car is
used to transport passengers. The first of this kind of ropeways was
Manakamana Cable Car established in 1998.

2.5 Airlines

Almost 44 airlines have a current air operator's certificate issued by the Civil
Aviation Authority of Nepal.

2.6 Pipelines

The pipeline was first proposed in 1999. An agreement was reached between
the NOC and IOC in 2004.[5] The project finally was set for construction after
the visit of Indian prime minister Narendra Modi to Kathmandu in 2014. Both
governments inked an agreement to execute the project in August 2015.
However, the project construction was delayed due to the 2015 earthquake in
Nepal and supply obstruction along the southern border.

11 | P a g e
 Chapter-3

Role of Government sector in Distribution Management

There is a huge role of government sector in distribution management. There
are different government sector which plays a huge role. Some of them are:

3.1 Nepal Food Corporation

Nepal Food Corporation is the Government of Nepal agency to manage food

market and import in Nepal. In 1974, agriculture purchase and Sales
Corporation spitted into agriculture input corporation and Nepal food
corporation.

3.2 Agricultural Inputs Corporation

Nepal is an agricultural country. Agriculture is the most important sector in

terms of income and employment generation Agricultural sector accounts for
about 27 percent of national GDP. About 65 percent of total population derive
it’s livelihood from agriculture and unallied activities. Krishi Samagri
Company Limited (KSCL) was established in 1965 as a public sector
enterprise to procure and distribute high quality and improved agricultural
inputs (fertilizers, seeds, agro-chemicals and implements) at a reasonable price
across the country.

Initially, AIC was named Agriculture Supply Corporation (ASC) before it was
merged with the Food Management Committee under the new outfit,
Agriculture Marketing Corporation (AMC). AMC dealt with both agricultural
inputs and food grains for about two years. In 1974 the government decided to
split AMC into AIC for the management of agricultural inputs and Nepal Food
Corporation for the marketing of agricultural produce.

On May 8, 2002 government converted AIC into Krishi Samagri Company

Ltd. (KSCL) and National Seed Company Ltd. under Company Act 1997 as a
12 | P a g e
state owned enterprises. KSCL has been assigned by the government to
procure and distribute fertilizers across the country. As Nepal does not have
indigenous production of mineral fertilizers, demand for fertilizers is met
through importation. The government has retained hundred percent equity of
KSCL. Now, National Seed Company Limited has merged into the Krishi
Samagri Company Limited. KSCL produces seeds and distributes all over the
country through its own offices.

3.3 Salt Trading Corporation

Salt Trading Corporation (STC) Limited is one of the largest business

organization in Nepal established as an experiment of the utility of Public
Private Partnership (PPP) for a developing country under PPP act of
Government of Nepal. About 48 years ago (established in 1963 AD), the
corporation was launched with objective to avail iodized common salt (since
salt is not produced in Nepal and depends on import from India and China) for
all citizens throughout the country. In the long run of its dedicated service to
the nation, STC has great contribution to ensure proper supply and distribution
of essential daily consumable goods (listed in Nepal Government’s Gadget),
erode black-marketing (regulate market & artificial scarcity) and industrial
development in Nepal. With the proportion of 79:21 investment from private-
public (state owned National Trading Limited), STC is managed by joint effort
of state (Government) and private (shareholders). In the business journey, Salt
Trading Corporation is a brilliant example of success that provides its services
through 93 offices (22 Offices and 71 liaison offices) that include nearly whole
population of the country as customers. STC has over 400 staff and has
provided opportunities for over 1000 workers and laborers. The group has
branches in all major towns in Nepal. STC has 5 production oriented factories.
Salt Trading Corporation Limited makes all efforts to provide goods and
services to the common people that have made STC a major catalyst in
bringing about the desired economic changes and growth in Nepal. STC is not
only focusing on providing its services to urban people (residing in towns and
metropolis), it also reaches out to the poor and needy people of remote districts
of Nepal (e.g. Himalayan regions). Realizing the need of quality products
throughout the country by following the Government of Nepal’s policy, Salt
Trading Corporation is moving towards business diversification by searching
for new products, innovative thoughts and new markets. The organization
engaged itself in corporate activities such as trade, import, export,
manufacturing (production), processing, supply and distribution of a vast
diversity of goods and services. Food products, agricultural products,
construction materials, machinery and tools, paper products and other goods
are the main commodities for trade and business. The central corporate office

13 | P a g e
of Salt Trading Corporation is located at Kalimati, Kathmandu, with its zonal,
branch, sub-branch and depot offices in different other parts of the country.

3.4 Nepal Oil Corporation

Nepal Oil Corporation (NOC) is a government owned organization established

in B.S. 2027 with the aim to import, store and distribute petroleum products
throughout the country. It has five Regional offices, three Branch Offices,
seven Aviation Fuel Depots and two Aviation Fuel Refueling Stations. It has a
total petroleum products working storage capacity of 68,364 KL (Kiloliters)
and has strength of around 600 employees.

Nepal is a land locked country bordering east, west and south with India and
northern side with China. Nepal totally depends on imports of refined
petroleum products from Indian Oil Corporation (IOC), India till date. It
imports petroleum products by more than 1,893 tank trucks which are under
NOC contract and distributes through more than 1563 privately owned retail
outlets. Present demand of petroleum products is around 1.9 Million Ton and
annual growth is around 10%. Petroleum products have a share of around 15%
of total energy consumed in the country. The nearest sea port Haldia (Kolkata)
is at a distance of around 900 kilometers. NOC has Contract Agreement with
IOC for smooth supply of petroleum products in every five years and the
contract was signed on 27th of March, 2017. LPG is imported by privately
owned bottling industries from Haldia, Barauni, Paradeep, Karnal, Mathura
and Panipat under product delivery order (PDO) issued by NOC. To meet the
ever growing demand smoothly and reduce the transportation cost, NOC and
IOC are laying pipeline from Motihari-Amlekhgunj in India and Nepal.
Similar working discussion is going on between IOC and NOC for laying LPG
pipeline in future endeavor. The highest policy making and controlling body of
NOC is its Board of Directors. Managing director of NOC is member secretary
and is responsible for management and operations. NOC has implemented
Automatic Petroleum Pricing Mechanism (APPM) since 13th Aswin 2071
(29th September, 2014). Thus petroleum prices are revised in Nepal in every

14 | P a g e
15 to 30 days on the basis of average international market price (i.e. Spot
price) of finished petroleum products.

Chapter-4

Role of wholesalers and retailers in Nepal Distribution

Management

There is a huge role of wholesalers and retailers in Nepal distribution

Management. Some of the role of wholesalers and retailers in
Nepal’s distribution Management are:

1. Distribution Efficiency
2. Market Coverage
3. Selection Facility
4. Financing
5. Bulk Buying
6. Promotion
7. Services

15 | P a g e
 Chapter-5

Problems and challenges in Distribution System of Nepal

There are different problems and challenges in Distribution System

of Nepal. Some of the problems and challenges in distribution
system of Nepal are:
Difficult topography

Landlocked character of the country

Scarce domestic productions

Import-based economy,

Lack of proper rules and regulations

Geographical concentration of industries and businesses

Lack of visionary decisions (short-sidedness decision) with planners and

decision makers

16 | P a g e
 References

https://www.slideshare.net/thapasir/distribution-management-in-nepal

http://noc.org.np/about

https://www.stcnepal.com/?pg=page&pid=24&id=27

https://www.youtube.com/

https://www.wikipedia.org/

17 | P a g e
18 | P a g e