Nepali Times
Economic Sense
What’s cooking


This wedding season anywhere between 1,000 to 5,000 couples will tie the knot in the Valley. And each wedding generates business for the ever busy and growing catering sector. In the past decade, more families opted for outsourcing food, space and services instead of depending on the traditional network of friends and families helping out. The trend is spreading outside Kathmandu too and like any other business in Nepal, there are issues that need looking into.

The business model and services profile of the caterers in Kathmandu is a replication of the Indian model. The major issue in Nepal, like any other product that goes into oversupply, is quality. Unfortunately, quality has never been an issue here so catering companies trim their costs to plump up profits.

The catering business poses a challenge to hotels that operate in the organised sector. With little regulation on product or quality, unlike in hotels, caterers get away with anything. Furthermore, these companies do not have to take care of labour benefits or even pay minimum wages. It seems labour organisations have exempted this category from seeking proper labour rights and benefits.

The lower costs of infrastructure and operations are a threat to hotels that have to abide by union rules, fair pay and strict quality controls. While the bigger kahunas have yet to feel the pinch, smaller hotels are feeling the heat. They are beginning to comprehend that they do not operate on a level playing field. Perhaps this is why there may be a little truth in rumours that the Beed has heard about a few hotels that have their food brought in by catering companies to cut costs. If there is any truth in that, such measures can only be short-term.

Another reason why the catering business is so lucrative is because they operate outside the tax net. No bills are made, service taxes and VAT aren't applicable and most of the business is simply 'cash down'. Catering companies that offer no-questions-asked services are a blessing for customers too, especially for those who are reluctant to reveal where their cash comes from or those who'd rather not pay extra taxes on an already expensive wedding.

It's only a matter of time before the Finance Ministry wises up to this business, which at current estimates, rakes in more than Rs 100 million annually. Government regulations are necessary to make catering companies improve the quality of their products and services. Catering companies worldwide have an equal share in the food/service business compared to hotels and restaurants. They must be brought under the tax net, the quality of their assets must be monitored and aspects of labour legislation looked into. On the face of it, the current status quo might seem like a good thing-everyone has their cake and gets to eat it too-but it is vital to get the right regulations in place before the situation gets out of hand. Just some more food for thought as we tuck into more heaped platefuls at the next wedding reception.

(11 JAN 2013 - 17 JAN 2013)