The government, under the topic of State-owned Enterprises Reform Program, had allocated Rs 770 million to 36 public enterprises for the current fiscal year. [break]But so far their expenses have topped Rs 1.02 billion, according to the Corporation Coordination Division of the Ministry of Finance.
This sum, however, is believed to be just the tip of an iceberg, as many public enterprises have mobilized financial resources on their own by resorting to credit extended by financial institutions or government agencies, records of which are not available.
Nepal Oil Corporation, which has received just Rs 750 million from the Corporation Coordination Division, is one such example. The loss-making fuel monopolist has also acquired credit of Rs 4.5 billion from government agencies like Citizens Investment Trust and Employees Provident Fund to clear its debt with the Indian Oil Corporation.
The government annually earmarks a certain budget to public enterprises under the State-owned Enterprises Reform Program. This amount is made available to public enterprises to support their recapitalization and restructuring plans, and fund capital expenditure, such as installation of machinery.
But as in the case of NOC, most of the amount extended by the government is spent on covering administrative expenses or funding their recurrent expenditure, like purchasing raw material.
“The purpose of allocating money for PEs was never to fund their consumption, as they were established with commercial purpose. They should generate the money on their own to feed their staff and cover other daily expenses,” a high-ranking official of the finance ministry told Republica on condition of anonymity. Yet this is not happening.
Records show a total of Rs 107.03 million was extended this fiscal year to four PEs just to cover salary expenses. Of the amount, Rs 1.5 million went to Nepal Metal Company, while two scrapped companies - Agricultural Tools Factory and Birgunj Sugar Factory - received Rs 1.87 million and Rs 3.66 million, respectively, to clear salaries of security personnel hired to look after the property.
A study conducted two years ago had put average monthly remuneration of each staff at PEs at Rs 34,126. Multiplying this with over 33,500 heads currently employed at these firms show the government is spending over Rs 14 billion on remunerations alone. Their contribution to the state vault in forms of dividend stood at Rs 4.82 billion in fiscal year 2009/10, of which Rs 4.80 billion was contributed solely by Nepal Telecom. This means the government coffer is coughing up an extra of around Rs 9 billion per year just to cover staff expenses at PEs.
It is undisputed that PEs are overstaffed, which definitely is adding financial burden on the government. But in addition to this, the practice of retaining employees even after closure of a factory is also adding to the burden.
For instance, the government has been releasing Rs 4.2 million to Nepal Drugs Limited every month to cover salary-related expenses of 279-strong workforce, despite closure of the company almost three years ago. Although the company, which recently received Rs 72.76 million from the government to settle its loan liabilities at Nepal Credit and Commerce Bank, is planning to resume its operation soon, its annual revenue would be sufficient to pay back salaries of around four months only.
The government is mulling over introducing voluntary retirement scheme at the state-owned pharmaceutical firm, but employees have demanded Rs 579.1 million for the program. If the scheme is rolled out, even the lowest ranking staff will take home Rs 600,000 each, a sum considered “exorbitant” by the finance ministry.
The situation is almost the same at Janakpur Cigarette Factory, which took away Rs 100 million to feed staffers this fiscal year. The cash-strapped company, which has remained shut for around two years due obsolete machineries and lack of funds to purchase raw materials, has also requested for additional Rs 606 million to clear the liabilities of retired staff, purchase raw materials, renovate machineries, settle overdue payment on purchase of tobacco and clear tax dues, staff salaries, house rent and utility bills.
Although many are not in favor of the state running a cigarette factory, the government has not been able to take a concrete decision in this regard due to political pressure as the factory employs around 1,000 people.
“The government should immediately dispose enterprises whose existence do not mean anything to the state,” renowned economist Chiranjivi Nepal said. “If these white elephants are not taken care of in time, the state coffer will continue to bleed.”
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