Govt not to revive coma-stricken JCF
KATHMANDU, MAY 21 -
The government has decided not to revive and operate the moribund Janakpur Cigarette Factory ( JCF ). The state-owned company 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. Deciding that enough is enough, it wants to pass the headache to the private sector if there are any takers.
Finance Minister Shankar Prasad Koirala said that the factory’s 833 employees would be paid off and its liabilities cleared before scouting for potential investors to run the once reputed factory. Built in 1965 as a gift of the then Soviet Union, JCF was the champion of the market during its heyday. It manufactured a slew of brands, each of which had a dedicated fan following. The company went into a tailspin a decade ago as mismanagement, overstaffing and quality loss of its products took its toll.
The government’s effort to offload JCF has come as per the recommendation of the Public Enterprise Board (PEB). A few months ago, it had recommended that the private sector be allowed to run the factory after paying off its staff. The board had raised a moral question whether it was right for the government to operate a cigarette factory.
Following efforts of the previous administration to resurrect closed public enterprises, Finance Minister Koirala said that the government would no longer make extra investments to revive them. However, the government would respond positively to private parties expressing interest to operate them.
Meanwhile, the ministry has formed a study committee under the coordination of an under secretary to recommend the modality for paying off the company’s staff and debts. Representatives of the Industry Ministry and JCF also sit on the committee.
“The committee is expected to give its recommendation shortly, and we expect to complete paying off the staff within the current fiscal year,” said Dhundi Pokharel, chief of the ministry’s public enterprises coordination division. “The government will pay off the staff and take control of all the assets of the factory before offering it to the private sector to operate.
The factory, which is located in the country’s south-eastern plains, was closed two years ago. Since then, the government has paid the factory’s liabilities amounting to more than Rs 200 million, according to the Finance Ministry. “Paying off the staff is expected to cost Rs 1.5 billion to Rs 2 billion,” said Pokharel.
Meanwhile, the factory’s staff have also been demanding voluntary retirement with certain benefits. According to a study conducted by the PEB, JCF has not been running well for a long time, and its closure resulted in losses amounting to Rs 381 million in fiscal 2011-12. The factory lost Rs 218 million in the previous fiscal year.
The factory’s debts to the government, banks and suppliers stand at Rs 2.5 billion. It owes Rs 1.39 billion in salaries, medical allowances, gratuities, retirement benefits and provident fund to its staff. It has not paid retirement benefits amounting to Rs 650 million and medical benefits amounting to Rs 270 million to its employees.
Likewise, it owes Rs 70 million to tobacco suppliers in India, Rs 350 million to different banks and financial institutions and Rs 210 million to Rastriya Beema Sansthan in insurance premiums. It also owes the government Rs 300 million in outstanding loans, according to a PEB report.
“The staff should have been paid off a long time ago,” said PEB chairman Bimal Wagle. “The longer it is delayed, the higher the costs for the government.”
JCF might have massive debts, but it owns prime real estate which makes it a wealthy sick public enterprise. The PEB study has estimated the value of its fixed assets at Rs 10 billion. According to the PEB, JCF owns land and buildings in 18 locations in the country from Biratnagar in the east to Mahendranagar in the far west. The largest plot of 33.5 bighas is situated in Janakpur. It also owns land in Nepalgunj, Butwal, Dhangadhi, Dang, Surkhet, Gaighat, Narayanghat, Mahendranagar in Dhanusha, Birgunj, Pokhara, Galkot, Baglung, Kusma, Parbat, Dadeldhura, Jomsom and Musikot of Rukum.
One and a half years ago, the factory sold a prime plot of land at Naya Baneshwor, Kathmandu to the Citizens Investment Trust (CIT) for Rs 722 million, but the money was not enough to get the factory back on its feet.
Meanwhile, there have also been attempts to seek assistance from Russia to reopen it. As per the recommendation of the factory management, the Industry Ministry had even prepared a proposal and sent it to the National Planning Commission and the Finance Ministry to ask Russia for help. They rejected the plan as it also involved massive government investment.
Source: The Kathmandu Post
