Government fails to run industries

It could be an eye-opener for the government that it has completely failed in operating industries.
During 2007-08, major loss-making ventures of the government were Udayapur Cement Industry and Janakpur Cigarette Factory (JCF) with losses amounting to Rs 266 million and 154.5 million respectively. "The net loss of seven PEs of the industrial sector doubled to Rs 435.9 million from Rs 272.7 million in 2006-07," said a report of the Finance Ministry.
The demand for cement is growing because of the construction boom but Udayapur Cement Industry posted loss. "Total sales of Udayapur Cement Industry has declined due to reduction in its production. Its loss increased due to its inability to minimize the cost of production proportionate to the decline in production," said the report.
The cumulative loss of Nepal Orind Magnesite Private has reached Rs 3.58 billion including this year's loss of Rs 86.1 million. Nepal Drugs Ltd has posted Rs 66.1 million profit -- basically due to sale of fixed assets to the tune of Rs 116.2 million.
Dairy Development Corporation (DDC) incurred net loss of Rs 89.8 million during the period despite a profit of Rs 14.7 million in 2006-07. "This was due to an increase in administrative expenses and provision of gratuity," the report said.
The total outstanding debt of all PEs in the industrial sector amounted to Rs 3.63 billion during 2007-08. However, net fixed assets also increased to Rs 4.67 billion from Rs 1.82 billion. The overall progress of the industrial sector does not seem to be satisfactory, said the government report. There is no improvement in the condition of Nepal Orind Magnesite and its financial burden has been increasing each year.
Of the total number of PEs established in the 60s, currently 36 are operating under full or majority ownership of the government. Of these 36 enterprises, seven are in the industrial sector, six in the trading sector, seven in the service sector, five in the social sector, three in the public utility sector and eight in the financial sector.

JCF neckdeep in trouble
JANAKPURDHAM: Janakpur Cigarette Factory (JCF) is facing a serious financial crisis and the factory is operating by using overdraft for operational costs. The company is currently at a loss of over Rs 530 million, including Rs 500 million overdrafts and Rs 30 million interests. The crunch in operational capital occurred due to high maintenance costs and high wastage due to the old rotary filter cigarette producing machine, AC plant and other equipment. The factory was set up 45 years ago with Russian support. Most of the machinery dates back to inception time. It will cost Rs 440 million to change the machines. Technicians said the factory is in a dilapidated condition and it would require Rs 1 billion immediately to keep the factory operating smoothly. They added that the factory is suffering a monthly loss of over Rs 12.5 million due to old machinery. The factory management has urged the government to arrange funds for the factory by selling its fixedassets like land. The factory owns land worth Rs 2.75 billion. Meanwhile, the factory is facing problems in arranging over Rs 260 million funds to be paid in gratuity funds to over 240 staffers who retired recently. Production in the factory has also been declining due to lack of modern equipment. Last year, the factory produced 1.15 billion sticks of cigarettes against the target of 2.36 billion sticks.