KATHMANDU, June 14: The Ministry of Industry has sought Rs 2.24 billion from the government to revive financially-troubled state-owned Janakpur Cigarette Factory, which has remained closed for almost two years now due to lack of raw materials and obsolete machineries.
The proposal, which was initially forwarded to the National Planning Commission, is currently at the Ministry of Finance, where officials are discussing the financial viability of the project.
“It may take us some time to come up with a decision,” a high-ranking official of the finance ministry told Republica on condition of anonymity.
The industry ministry, in its business plan, has said that Rs 1.76 billion of the total amount must come from the government to resume operation of the cigarette factory, which once used to make renowned Yak, Gaida and Deurali brands of cigarettes. It is hoping to get remaining Rs 480 million in grant from the Russian government, which helped establish the factory in January 1965.
But finance ministry officials are wary about extending such a huge sum to the factory as it is not known whether it can reclaim its market share, which it has lost to Surya Nepal. Besides, even if the fund is released, more than half of the demanded amount will go toward launching voluntary retirement scheme and settling other staff liabilities.
In its business plan, the factory has said it would require Rs 1.24 billion to cut down 550 jobs in the factory, which is currently employing around 985 people. The amount is 55 percent of the total amount demanded for its revival. The plan also says another Rs 265 million is required to clear dues of retired staff.
“It is not known whether the amount proposed to introduce golden handshake scheme is justified. We are still discussing on it,” the official said.
Compared to a huge sum sought to relieve employees from their duties, the factory has demanded only Rs 480 million to purchase new machinery.
This capital expenditure will enhance the production capacity of the factory to 2.36 billion sticks of cigarettes per year, helping it to generate annual revenue of Rs 3.54 billion and profit of Rs 1.4 billion, the business plan says.
On top of these, the capital injection will also allow the factory to contribute Rs 1 billion to the state coffer in the form of taxes, the plan says.