Government finally dissolves Janakpur Cigarette Factory, to pay off staff

The government has finally decided to pay off the employees of Janakpur Cigarette Factory (JCF) that has been closed since last two years.

The cabinet meeting today decided to pay off some 758 staffs of Janakpur Cigarette Factory, according to the Ministry of Industry that informed that the cabinet has also dissolved the board of the factory.
The government has, however, formed a committee led by a joint secretary at the Industry Ministry to recommend measures to be taken to manage assets including machinery of the factory.
Though, the state coffer will have to bear Rs 2 billion for the laying off of the staffs including their salaries, gratuity and benefits, it will be a beneficial proposition as the investment in the closed cigarette factory has become worthless due to no output. 
As the employees have been demanding extra gratuity saying that they are retiring prematurely, the government will give them one extra month’s gratuity. “But they will be paid in two installments,” the ministry said, adding that they will get a salary and other benefits in the current fiscal year and additional benefits will be given in the next fiscal year.
Earlier, the Public Enterprises Board (PEB) had suggested the government to pay off the staff and hand over the factory to the private sector, if they can operate it. But the loss-making Public Enterprises (PEs) needs to be either privatised or closed to lessen the burden on state coffer, the study has suggested.

Established in 1965 with the then Soviet Union's assistance, the cigarette factory was once the largest contributor to the government coffer. But regular political bickering and policy confusion hurt the factory's output. 

The study had also revealed that the factory owes Rs 70 million to tobacco suppliers in India and Rs 210 million to Rastriya Beema Sansthan (insurance premiums). Its fixed assets have been estimated at Rs 10 billion.

ALSO READ: http://businessjournalist.blogspot.com/2013/06/government-to-pay-off-closed-janakpur.html

Government to pay off closed Janakpur Cigarette Factory staff

The government finally seems to have come to terms with reality and is planning to pay off staff of the closed Janakpur Cigarette Factory (JCF).

"The government is bringing a pay off plan in the budget for next fiscal year 2013-14," according to senior economic adviser to the finance ministry Dr Chiranjivi Nepal.

The factory that was once the largest contributor to the government coffer has been closed for the last two years. However, the ministry had been paying around Rs 80 million annually as salary to employees without any output.

The inefficiency and indecisiveness of successive governments will not only cost the government Rs 3 billion to pay off all the staff -- Rs 4.5 million per head -- but is also against the liberal market economy. However, two committees formed to study the current status of the cigarette factory have stated that it has assets worth Rs 10 billion.

"The private sector is strong enough to operate industries," said Nepal, adding that the government's role is to facilitate the private sector and not to operate cigarette and alcohol industries.

All the public enterprises that have been adding liability to the government exchequer and cannot contribute to production has to be closed, Nepal added. The Public Enterprise Coordination Department has also suggested the government to close down unproductive public enterprises.

Established in 1962, Janakpur Cigarette Factory used to be the largest single contributor to the national exchequer with four per cent to revenues.

The government, fearing that it will cost a huge amount to pay off the 758 staff, has been unable to decide.

The ministry has already lent the closed factory Rs 56.6 million in the current fiscal year.

According to the Economic Survey 2012-13, in fiscal year 2010-11, some 21 public enterprises were running at a net profit, where as 14 were in net loss. "Likewise, the net profit of all the 37 public enterprises had also declined to Rs 6.68 billion in fiscal year 2010-11, compared to Rs 10.56 billion in the previous fiscal year 2009-10," it said, adding that in fiscal year 2009-10, the net fixed assets of 37 public enterprises amounted to Rs 139.36 billion, which had decreased to Rs 118.28 billion in fiscal year 2010-11. "Among the public enterprises under the industrial sector, Janakpur Cigarette Factory has incurred the heaviest loss of Rs 218.1 million."

The government has already lent a total of Rs 141.90 million to public enterprises in the current fiscal year.