PE Board suggests leasing out Janakpur Cigarette to pvt sector
KATHMANDU, Oct 15: The Public Enterprises Management Board has recommended leasing of assets and management of Janakpur Cigarette Factory to the private sector as the only option to revive the state-owned tobacco company that has remained closed for two years now.
The suggestion is laid in a report that the Board - an advisory body to the government on functioning of public enterprises - is soon forwarding to the Ministry of Finance.
The recommendation made by the Board will be implemented only if the finance ministry and the Cabinet extended green signal.
“The option of leasing out the factory to the private sector was given as we believe the government should not be involved in production of goods like cigarette, which is harmful to human health,” Narayan Bajaj, a member of the Board and also a chartered accountant, told Republica.
“We also believe it is high time for private sector involvement in running of the factory as the government has failed to generate profits and lost significant chunk of market share to private companies while steering it on its own.”
The terms and conditions on leasing out the company to the private sector would be finalized once the Cabinet approves the recommendation extended by the Board, according to Bajaj.
Established in Jan 1965 with the support of the Russian government, the factory once used to make famous brands of cigarettes like Yak, Gaida and Deurali. But after its near-monopoly in the tobacco market ended following entry of Surya Tobacco, it started losing its market share. And by the year 2010/11, the company had accumulated a cumulative loss of Rs 170.80 million.
The company has cited use of obsolete machines that led to its failure in a report launched by the government in mid-July. But in addition to that unnecessary political intervention in operation of the factory, unnecessary interference in appointment of the factory´s chief and overstaffing have also led to the failure of the company.
Ultimately the company was closed down around two years ago after it failed to generate adequate revenue to purchase raw material.
Earlier in February, top officials of the factory had met with Finance Minister Barsha Man Pun and demanded Rs 606.4 million to bring the closed state-owned enterprise into operation. The officials had also said the company would need a cash injection of Rs 1.99 billion in the long-run to run the factory.
Then in June, the company, through the Ministry of Industry, sought Rs 2.24 billion from the government to revive the financially-troubled factory.
The business plan presented at that time said the factory would require Rs 1.24 billion to cut down 550 jobs in the factory, which is currently employing around 1,000 people, and another Rs 265 million was needed to clear off dues of retired staff.