KATHMANDU, Dec 27: Gorakhkali Rubber Factory has proposed to the government to extend guarantee to obtain loan of Rs 200 million for purchase of raw materials, lack of which has terminated production in the state-owned enterprise.
The company, which has debt of around Rs 1 billion in various financial institutions, made the proposal after it was shunned by various banks, where it has been listed as one of the loan defaulters.
“If we can get this amount, we can purchase enough raw materials to obtain breakeven point,” Bhibhas Chintan, a board member of the company, told Republica. He also clarified that the amount the company is demanding this time is purely for purchase of raw materials and not to settle other liabilities.
Lack of raw materials has always resulted in closure of production units at the state-owned company. This fiscal year starting mid-July, for instance, the factory remained open for around 20 days, while in the last fiscal year the production units remained open for only 56 days.
But even during the days when machines churn out goods, capacity utilization at the company remains at a low level as a result of which huge losses have to be incurred, Chintan said. According to him, the highest capacity achieved by the factory so far is 43 percent.
“If we can get Rs 200 million as requested, capacity utilization can be raised to 48 percent, with which we can easily obtain breakeven point,” Chintan claimed.
Another reason that has caused the company´s production capacity to take the beating is obsolete production facilities. To spruce up its manufacturing activities, the company has said, the government needs to invest around Rs 1.6 billion to purchase modern plants.
However, the government, which has so far pumped in more than Rs 510 million in the troubled industry, has not made any decision in this regard.