Government weighs cost of shutting down defunct JCF, Nepal Drugs
KATHMANDU, JUN 14 -
Paying off the workers of both Janakpur Cigarette Factory (JCF) and Nepal Drugs at the same time will involve a lot of money for the government. The two factories have remained inoperative for a long time with their large workforce drawing salaries for doing nothing.
A Fast Action Taskforce formed to calculate the actual liability of JCF while paying off staff, repaying loans to banks and paying taxes to the government said it would cost a maximum of around Rs 3 billion.
The taskforce headed by under secretary at the Finance Ministry Prem Pandey said that it would cost Rs 1.56 billion to pay off the staff as per the factory’s existing employee regulation.
“With the employees demanding retirement benefit of an additional one and half months even though they are entitled to only one month’s benefit, the government will have to spend another Rs 400 million,” said Pandey. Older staff members who are nearing retirement age are demanding additional benefit by increasing their service period to retirement age, according to Pandey. If their demand is addressed, it will cost an additional Rs 90 million. The factory has 833 employees.
“Following the report of the taskforce, we are at the final phase of paying off the staff,’ said Dhundi Pokharel, chief of the ministry’s public enterprises coordination division.
The factory owes Rs 500 million in loans to banks and Rs 120 million in taxes to the government. The factory also owes hefty sums to its raw materials suppliers. A study of the Public Enterprise Board (PEB) in 2012 showed that it owes Rs 70 million to tobacco suppliers in India. It also owes Rs 210 million to Rastriya Beema Sansthan in insurance premiums, according to the PEB report.
The board study valued its fixed assets at Rs 10 billion, but it does not have cash currently. That means the government will have to put up cash to pay off the staff and clear other liabilities. The PEB has suggested allowing the private sector to run the factory after paying off its staff.
Meanwhile, Nepal Drugs has liabilities valued at Rs 1.26 billion, according to a study report prepared by the PEB. However, an official of the Finance Ministry said that payments to employees alone could reach Rs 1.15 billion provided their demands are fulfilled. While paying off the staff as per Nepal Drugs’ Employees Regulation, it will cost Rs 360 million only. But government officials said that the factory’s 250 employees are demanding additional benefits because of their premature retirement. The company owes Rs 470 million to the government in taxes, according to the ministry. Its assets have been valued at Rs 5.37 billion.
According to Finance Ministry officials, the government has not yet decided what to do with regard to Nepal Drugs from among the suggestions presented such as privatization, giving its factories to private sector on lease and giving the management contract to the private sector.
“A proposal will be presented to the privatization committee headed by the finance minister at its next meeting which will decide on the matter,” said joint secretary Pokharel at the ministry.
However, ministry officials said that paying off the staff is a must as most of the existing employees will become ineligible when the factory adopts the World Health Organization Good Manufacturing Practice (WHO/GMP). Ministry officials said it would cost Rs 500 million to Rs 550 million just to adopt the WHO/GMP standard which drug manufacturers were required to adopt last year.
As both JCF and Nepal Drugs have remained closed, no money has been coming in but the government has been paying the staff. JCF has remained closed since 2011 after sinking into a mess due to political interference, mismanagement and overstaffing. The factory has not produced a single cigarette for the past two years. However, the government has been shelling out Rs 1 million daily for staff salaries and other expenses.
According to a study conducted by the PEB, it has not been running well for a long time, and its closure resulted in losses amounting to Rs 381 million in fiscal 2011-12.
Source: The Kathmandu Post
