Talk aims to get Butwal yarn factory out of mothballs
The federal and provincial governments have reignited talks of Butwal Dhago Karkhana exiting mothballs, but observers are skeptical because successive administrations have been saying so for more than a decade.
Once Nepal’s biggest spinning mill, Butwal Dhago Karkhana has closed amid a wave of closures of various state-owned enterprises crippled by mismanagement and political interference.
Krishna Dhwaj Khadka, minister of economic affairs and cooperatives of Lumbini province, said discussions were underway to reopen the iconic factory located in south-central Nepal.
“There was no decision to hand it over to the private sector or to operate it under a public-private partnership model,” he said. “Discussions are ongoing with the federal government and the private sector.”
Khadka said a decision would only be made after extensive deliberation. He said that if the government gave the green light to the plan, the federal government would prepare a procedure to make the ailing industry work by involving the private sector.
Butwal Dhago Karkhana was established in 1983 with the aim of exporting yarn and thread to the international market.
The factory began production in 1991; but within a decade it had gone bankrupt. Unions and employees attached to various political parties have destroyed it with their endless strikes and interference.
After Nepal suffered a severe power shortage resulting in hours of power outages across the country, the company shut down for good.
Buildings and equipment costing millions of rupees are in a dilapidated state. The machines have developed rust.
The government established the factory with a plan to grow cotton in Nepalgunj, produce yarn in Butwal and manufacture fabric in Hetauda Textile Mill.
Shortly after opening, the business was plagued by political interference. Political appointments, corruption and mismanagement have become the order of the day.
The factory’s losses began to pile up and it was up to its neck in debt. It could no longer remunerate its employees with the income from the production and sale of its goods. The business eventually collapsed.
In 2003, the government leased the plant to Salt Trading Corporation, another state-owned company. But he also retired after a year.
The management of the factory was then taken over by the Reliance group, a private conglomerate. He managed the factory until mid-March 2008.
Unable to control soaring debts, the government decided in mid-September 2009 to automatically retire all of its employees. He retained four people to look after the property.
The factory contains six large buildings out of 143 ropanis in the industrial area of Butwal. Buildings with a floor area of 23,000 square meters are now covered in cobwebs.
During the rainy season, the machines are submerged in water due to leaks in the roof. About 56 large machines used to produce yarn rusted.
A year ago, Shankar Pokharel, then chief minister of Lumbini, decided that the provincial government would run the factory again.
Then, Leela Giri, the Minister of Industry, Tourism, Forestry and the Environment, pledged to revive the factory. But nothing happened.
Chief Minister Kul Prasad KC also announced that the government would resuscitate the plant. But there was nothing in the provincial budget to deliver on the promise.
Federal government policies and programs for this fiscal year announced by Finance Minister Janardan Sharma also mentioned that necessary policies would be formulated to make Butwal Dhago Karkhana work. But there was no budget allocation.
Most industry ministers from the federal government have visited the plant.
A succession of industry ministers, namely Anil Jha, Karna Bahadur Thapa, Mahesh Basnet, Som Prasad Pandey and Nabindra Raj Joshi, inspected the factory. But the result was zero.
A team led by Baburam Gautam, co-secretary of the Ministry of Industry, recently completed a field study.
Dolraj Sharma, head of Butwal Dhago Karkhana, said the plant was not operational in its current situation. “It needs a complete overhaul with modern technology.”
The factory had over 700 employees at its peak. When it closed, it laid off 450 permanent employees.
Baburam Bohra, former president of the Rupandehi Industry Association, said “false assurances” come from the government all the time. “One of the great factories in the country and its machines have turned into wrecks.”
In 2013, the Industrial Council submitted a report to the government suggesting that the factory could be handed over to the private sector. But this suggestion was also not implemented.
Butwal Dhago Karkhana was established under a public-private partnership model. The factory has received investment from the government, Khetan Group, Salt Trading, Birgunj Sugar Mill, Himal Cement, Janakpur Cigarette Factory, Nepal Industrial Development Corporation and the public.
The government holds 59.75% of the shares, the companies 18.5%, Khetan Group 13.4%, Salt Trading Corporation 8.3% and the general public the remaining shares.
At the time of its establishment, the factory had an authorized capital of Rs 600 million, an issued capital of Rs 450 million and a paid up capital of Rs 370 million. Of the total investment, 30 million rupees was public capital.
Ujjwal Kasaju, president of the Butwal Chamber of Commerce and Industry, said it would not be possible to operate the plant under the old modality.
“The public part has not been finalized, former employees may go back on strike,” Kasaju said. “There are also no details of the plant’s shareholders.”
Kasaju suggested that instead of reviving the yarn factory, a new textile factory would be appropriate due to current market demand.