Nepal Today

Thursday, June 13, 2013

ADD HLPM MEETS AGAIN SUNDAY Kathmandu, 14 June: HLPM will meet Sunday under chairmanship of Bijaya Kumar Gachedhar. UML Chairman Jhalanath Khanal presided over the rotating chairmanship Friday for the month of Jestha. Nnnn COST OF SHUTTING DOWN JCF, NEPAL DRUGS LTD. BEING STUDIED Kathmandu, 14 June: 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, Prithviman Shrestha writes in The Kathmandu Post. . 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. nnnn BHAIRAHAWA SEZ TO BE OPERATIONAL Kathmandu, 14 June: The Bhairahawa Special Economic Zone (SEZ) that was planned to be operational within this fiscal year will come into operation from the beginning of next fiscal year. “The Bhairahawa SEZ will come into operation from next fiscal year,” according to joint secretary at the trade ministry Jeet Bahadur Khadka, The Himalayan Times reports.. The Bhairahawa SEZ, whose construction started in 2008, can generate 9,100 jobs over a decade, according to a report ‘Creating Competitive SEZ Regime’, prepared jointly by the International Finance Corporation, Foreign Investment Advisory Service, and IFC-South Asia Enterprise Development Facility. “In a worst case scenario, the Bhairahawa SEZ will create 9,100 jobs,” it projected, adding that it could generate around 13,300 jobs in a progressive case scenario and employ 20,500 people in the best case scenario. “The Bhairahawa SEZ — the first of its kind in the country — will also fetch investments worth Rs 427.86 million in a decade in a conservative estimation, Rs 625.34 million in a progressive estimation, and Rs 883.94 million in the best case situation over a span of 10 years,” it added. The SEZ will not only create employment and attract investments, but also help the government earn revenue. “In a decade, it could earn Rs 4.5 million revenue for the operator in a worst case scenario,” the report predicted, adding that in a middle case scenario it could generate Rs 6.65 million, and in the best case scenario it could earn Rs 10.25 million for the operator in 10 years. Some dozen companies are interested in shifting their bases to the Bhairahawa SEZ but it depends on the government’s policy which will decide on what type of industries will be located in the SEZ, though earlier, it had planned to house only export-oriented industries. However, some industries have been asking the government to allow industries that are domestic-market based also to have their bases in the SEZ with incentives. Likewise, the smooth operation of the SEZ depends on how early government brings the SEZ Bill. As there is no Parliament, the government should bring the Bill through an ordinance before the SEZ comes into operation to address the facilities — like bank finance, lease facility, special labour Act for effective operation of industries — that it offers. After it comes into operation, the government will start building necessary infrastructure for the Birgunj SEZ. The government plans to look after overall management of the SEZ but the private sector will establish export-based industries within the SEZ. Nnnn FERTILIZER TENDER PUT ON HOLD Kathmandu, 14 June: Agriculture Inputs Company (AIC) has put a tender notice for the supply of chemical fertilizer on hold as per a stay order of the Appellate Court, Patan in response to a petition filed by an Australian-based company, Lobana Trading, The Kathmandu Post writes.. AIC had called for tenders for the supply of 30,000 tonnes of urea and 20,000 tonnes DAP on April 13. Lobana Trading stated in its petition that it had already signed an agreement with AIC to supply 30,000 tonnes of urea in 2012. The court has given a seven-day deadline to the two parties to resolve the issue. It has also ordered AIC to halt procurement of DAP although Lobana had only asked that the planned purchase of urea be stopped, said an AIC official. According to AIC’s officiating managing director Amar Raj Khair, Lobana had been unable to supply the contracted fertilizer as Nepali banks were reluctant to deal with it due to its poor business credibility. “Lobana failed to supply urea within the stipulated time as per the contract as it was not able to open Letters of Credit,” said an AIC official. “Due to the delay, AIC issued a new tender.” Khair, however, said that the court has given seven-day time limit to settle the issue. “We will have no option than to seek remedy from the Supreme Court if talks fail to resolve the issue between the two sides,” Khair added. According to him, the Appellate Court’s order could lead to a shortage of chemical fertilizer as it has ordered stopping the supply of both DAP and urea. He said that the current tender for fertilizer had been targeted for winter crops. “But there will be no shortage of chemical fertilizers for this paddy planting season.” AIC said there will be no fertilizer shortage during this paddy planting season as it currently has 40,000 tonnes of fertilizers—30,000 tonnes of urea and 10,000 tonnes of DAP—in its stock. The government has earmarked Rs 5 billion for AIC to subsidise fertilizers to farmers. However, some experts predict a fertilizer shortage this year, with India tightening its border points, which it does when the paddy planting season starts in the two countries at the same time. State-subsidized fertilizers fulfil just 25-30 percent of the total fertilizer demand and the rest is met from informal imports or smuggling through porous Indian border points. A study conducted by the Finance Ministry in 2006 has put the share of informal fertilizer imports at 71.6 percent. Fertilizer demand currently stands at 700,000 tonnes annually. The study shows that of the total imported fertilizer, around 50 percent is used for paddy and 15 percent for maize. Last year, an acute fertilizer shortage occurred due to two major factors—a delayed monsoon and import restrictions at the border. According to experts, farmers need to use more fertilizer to reduce the impact of delayed rains for good yields. Hundreds of farmers across the country were forced to protest against the government’s inability to arrange sufficient fertilizers during the peak paddy planting season last year. nnnn


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