PEs profits up, dividend down

Though Public Enterprises (PEs) recorded impressive profit in the fiscal year 2014-15 compared to a fiscal year ago, their return has decreased.
They posted net profit of Rs 33.92 billion in the last fiscal year compared to Rs 5.5 billion, some Rs 29 billion in 2013-14 more, according to a report published today by the Finance Ministry. But they paid Rs 6.45 billion to the government as dividend, which is less compared to what they had paid a fiscal year ago.
Of the 37 PEs, some 20 posted net profit, whereas other 14 are still in net loss compared to 15 in 2013-14. NOC, which was in net loss in 2013/14, logged impressive profit in the last fiscal year.
"The net profit of these PEs was Rs 5.5 billion in 2013/14. In 2012/13, they had reported net profit of Rs 11.4 billion," the report added.
Despite regular political bickering, increasing red tape and weak governance, PEs were in green due to huge profit churned by Nepal Oil Corporation (NOC), Nepal Telecom, Rastriya Banijya Bank Ltd (RBBL) and Agriculture Development Bank Ltd (ADBL).
NOC, which used to be in loss in the past years, recorded profit of Rs 15 billion in the last fiscal year, whereas Nepal Telecom, RBBL and ADBL have been contributing huge revenue to the state coffer after they successfully underwent reforms.
In 2013/14, NOC had had reported loss of Rs 6.25 billion.
Though profits of PEs have increased, their return to the government has decreased. In 2013/14, five PEs -- Nepal Telecom, Industrial District Management Ltd, Hydroelectricity Investment and Development Company, ADBL and Citizens Investment Trust -- had paid Rs 6.61 billion as dividend to the government. However, in the last fiscal year, only Nepal Telecom, Industrial District Management and National Housing Company paid Rs 6.45 billion dividend -- some 1.59 percent of GDP -- to the government.
"The return is only 5.12 percent of the government investment on PEs," the report said, adding that the rate of return is lower than the current interest rate. But PEs also pay income tax, Value Added Tax (VAT), and other non tax revenue to the government.
The government has made share investment of Rs 126.16 billion on PEs, according to the report.
Likewise, total operating income of 37 state-owned enterprises increased by 5.06 percent to Rs 270.48 billion in the last fiscal year from Rs 257.81 billion in 2013/14 -- 15.48 percent up from Rs 223.26 billion in 2012/13.
Though it alone cannot gauge the overall efficiency of PEs, the rise in operating income reflects improvement in efficiency of state-owned enterprises.
According to the report, three PEs -- Nepal Engineering Consultancy Service Center, National Construction Company Nepal and Janakpur Cigarette Factory have not submitted any financial data to the government as they have already paid off their employees.

Government plans to revive Nepal Drugs

The government plans to revive Nepal Drugs that has been closed since last three years.

"The government has decided to restart the closed Nepal Drugs to save the first drugs manufacturer and supply cheap but quality drugs to the people," said finance minister Shankar Prasad Koirala, here today during the discussion on Public Enterprises (PEs).

The government will prepare a short-term plan to run Nepal Drugs, he said, adding that the government enterprises should run professionally and competitively to take the market, instead of discussing on jurisdiction.

The participants, on the occasion, showed serious concern on low productivity of the state-owned enterprises.

Nepal Drugs will restart its operation under the Health Ministry but it has to be competitive to remain in the market, suggested finance secretary Shanta Raj Subedi. He also suggested the public enterprises not to dream of doing business from the loan of the government. "

The government buys Rs 1.20 billion worth medicines. "Nepal Drugs should be operated in professional manner with quality control," suggested health secretary Dr Prabin Mishra, on the occasion.

Nepal Drugs that used to manufacture anti-diarrhea mixture Jeeval Jal, Citamol, and saline water, has 240 employees, currently.

The participants also recommended lay off of one fourth staff and government guarantee to purchase its products.

However, the employees of Nepal Drugs have been opposing the plan to pay them off.

In the past too, the government had tried to revive some of the closed industry that could not become successful due to chronic political bickering and politics of the employees unions that have eroded the productivity but are getting salary from the national coffer misusing the people's hard earned money paid as tax.

The Public Enterprise Board had earlier valued the loss-making Nepal Drugs factory’s liabilities at around Rs 1.26 billion, whereas it has fixed assets worth Rs 5.37 billion.

Public Enterprises fail to pay Rs 2 billion tax

The government has failed to mobilise around Rs 2 billion revenue from its own enterprises, as it seems equally difficult to recover revenue from public enterprise (PEs) like from the private sector.

The Public Enterprises (PEs) have to pay the government around Rs 2 billion outstanding tax dues, according to the Finance Ministry.

These public utilities have representatives from the Finance Ministry also but have been failing to file tax. "They have neither audited nor filed tax," said a higher official at the Finance Ministry that has held a interaction with the heads of the state-owned entities yesterday.

The heads of the public enterprises were asked to audit – even if they are in loss – and file the tax, said joint secretary at the ministry Rajan Khanal.

The increasing outstanding revenue – non-tax and tax both – dues of the public enterprise is a serious concern, he said, adding that the ministry officials in the board of these utilities should also aware them.

Most of the PEs are in loss and they do not bother to file tax, which is not a good trend, he added.

Of the total 37 PEs, 21 are in loss in the fiscal year 2011-12, according to the Finance Ministry. The 21 PEs have incurred Rs 3.49 billion net loss in the fiscal year 2011-12, whereas in the fiscal year 2012-13, the government had invested Rs 101.23 billion.

The PEs like Udayapur Cement, Janak Educational Material Centre, Nepal Airlines Corporation, Beema Sansthan, Timber Corporation, Nepal Oil Corporation Nepal Electricity Authority are running in loss. The government has been pumping cash to pay the salary of the staff, but they have not filed tax promoting financial indiscipline.

NFC to buy 28,500-tonne of paddy rice directly from farmers

Nepal Food Corporation (NFC) is planning to buy paddy rice directly from the farmers this year.

"The corporation will buy 28,500-tonne of paddy rice directly from the farmers this year," said general manager of the corporation Dr Shivahari Shrestha, at the NFC's 39^th anniversary programme here today.

Due to the financial crisis in the corporation, it has planned to buy paddy rice, instead of rice, he said, adding that the corporation will benefit, if it buys paddy rice directly from the farmers before the harvest. "The corporation is planning to buy some 16,000-tonne of paddy rice from Banke, Bardia and Kailali."

The corporation – to improve its financial health and diversify its product and services – is also planning to trade other food grains and cereals, except rice.

In the fiscal year 2011-12, some 21 public enterprises, out of 37, were in loss and only 15 recorded profits, according to the Finance Ministry.
Like the most of the public enterprises (PEs), the state-owned food supply authority is also running in Rs 980 million net loss till the last fiscal year 2012-13 – according to the report of Public Enterprises published by the Finance Ministry – and the government has been providing it financial help to supply the food grains to the mountainous districts. This year the government has provided Rs 465.3 million to supply rice to some 23 mountainous districts.

PEs continue to perform poorly, post Rs 3.49 billion net loss

The government has been failing to effectively operate public entities, as the number of loss making Public Enterprises (PEs) has been increasing every year – adding eight more in 2011-12 compared to 2010-11 – along with plunging productivity.

Likewise, Public Enterprises (PEs) government investment on them has also seen remarkable increase every year.

Of the total 37 PEs, only 15 PEs recorded net profit, while 21 PEs – as Nepal Engineering Consultancy Service Centre Ltd did not record any transaction – have posted a net loss of Rs 3.49 billion in the fiscal year 2011-12 as eight more PEs went into red compared to a year ago, according to the annual report of the PEs published by the Finance Ministry here today. “The PEs had posted a net profit of Rs 6.58 billion in the fiscal year 2010-11.”
Similarly, government’s debt on these public entities stood around Rs 101.23 billion. The government had invested Rs 102.41 billion in shares and Rs 101.23 billion in loan in the PEs by the end of the fiscal year 2011-12.
Until the fiscal year 2010-11, the investment in shares and loan stood at Rs 92.19 billion and Rs 95.16 billion, respectively.
Nepal Oil Corporation (NOC), Janakpur Cigarette Factory, Nepal Oriend Magnetite and Nepal Drugs contributed to the huge loss in the public entities.
The state oil monopoly Nepal Oil Corporation (NOC) had a negative shareholders fund by Rs 9.47 billion, alone. Due to huge loss of NOC trading sector – one of the six sectors among the 37 PEs – have recorded loss.

Sectorwise, three – service, social and financial sector PEs – have posted profits, while the remaining three sectors – trading, industrial and public utility sectors – have posted loss.

However, the public sector companies have posted an operating profit of Rs 185.79 billion – an increase by 22.3 per cent – in the fiscal year 2011-12

Of the total PES, only two – Nepal Telecom and Rastriya Banijya Bank – paid return to the government. They paid Rs 6.26 billion – some 6.1 per cent of the total government investment in PEs – dividend compared to a 2.56 per cent a fiscal year ago, the report added. In the fiscal year 2010-11, the government had received Rs 5.49 billion dividends from the PEs.

The PEs’ operating income has contributed 12.1 per cent to Rs 185.79 billion to the GDP, said finance minister Shankar Prasad Koirala, releasing the PEs annual report here today. “Of the six sectors, social sector PEs has less contribution at 0.08 per cent to GDP, while trading sector has the highest contribution of 6.21 per cent to the GDP,” he said, adding that the reports has also pointed out the need to long term reform of the PEs with annual targets for each company according to their objectives and work. “If they are not reformed on time, it will be a huge burden on the government.”

Chronic disputes in PEs need to be resolved with the help of tripartite committee of concerned ministry, management and employees, he added.

Regular political bickering and increased unionisation have eroded the competitiveness of the PEs, the report said, suggesting that the Public Enterprises Direction Board should work effectively to boost competitiveness and professionalism of the PEs.
Of the total 37 PEs, only 21 has completed their auditing, while rest of the them have yet to complete their audit,” Koirala, said, suggesting to take action action against the PEs failing to complete audit. "Rastriya Beema Sansthan, Udayapur Cement and Oriend Magnesite have not completed their audit since last eight years."

Profitering PEs
 Nepal Telecom – Rs 10.89 billion

Civil Aviation Authority of Nepal – Rs 2.14 billion
Rastriya Beema Sansthan – Rs 1.19 billion
Rastriya Banijya Bank – Rs 1.13 billion
Citizen Investment Trust – Rs 694.60 million

(Source: Finance Ministry)

Loss-making PEs
Nepal Electricity Authority – Rs 4.78 billion
Nepal Oil Corporation – Rs 2.62 billion
Udayapur Cement – Rs 250.70 million
Nepal Television – Rs 116.90 million
Nepal Orient Magnetite – Rs 48.60 million
(Source: Finance Ministry)

Challenges of PEs

·        Excessive employees but shortage of skilled manpower

·        Trend of appointing temporary employees and/or on contract basis

·        Rising administrative costs that increased by 13.87 per cent to Rs 32.94 billion in the fiscal year 2011-12 from Rs 28.93 billion a fiscal year ago

·        Financial and managerial aspects of PEs weak

·        Trade unionisation and political bickering

·        Lack of latest technology and infrastructure

·        Pension liabilities have been increasing

(Source: Finance Ministry)

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.

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