Losses for plaster of Paris companies following withdrawal threaten shut downs and more layoffs

Fuel: The Druk Plaster and Chemical Ltd company in Samdrupjongkhar laid off 98 percent of its staff on July 21 and may shut down following heavy losses incurred.

An office order issued to the company’s staff mentions that 23 of 30 employees will be laid off on August 21 and the factory may shut down with immediate effect.

The shut down of the factory, which is located in Pemagatshel is attributed to government’s decision to withdraw subsidised kerosene.

The company that manufactures and sells plaster of Paris, was established in 2001 and has a total of 215 shareholders. Almost 100 percent of its product is sold in India.

Distribution of subsidised kerosene to plaster of Paris manufacturing companies was withdrawn from July this year because of the huge financial implications on the government.

The company’s CEO, Kuenzang Leki said that after subsidised kerosene was withdrawn, the company explored various alternatives to operate the factory, such as using diesel, but it was found not feasible given costs.

The CEO said the company had already sustained a net loss of Nu 1.35 million as of June 30 and therefore that was no option but to shut down the factory.

He added that lack of funds and fuel options necessitated the lay off of employees and shutting down of the factory because the sustainability of PoP manufacturing plants in Bhutan entirely depend on subsidised kerosene.

“We’re just left with few stocks,” he said. “We’ve issued lay off order now when the company can pay their benefits because if we prolong we may not be able to meet the benefits later if at all the company shuts down.”

Kerosene is one of the raw materials that goes into making plaster of Paris; it is used to heat crushed gypsum. The company receives about 50,000 litres of kerosene at the subsidised rate of Nu 29 per litre paid to the regional trade office. Without the subsidy, the costs jumps to Nu 55 per litre.

However, the office order leaves room for some hope. It adds that if the company sees any positive developments in the future, the office will recall employees “based on the actual need of the company.”

This is because the CEO said, the three plaster of Paris companies in Samdrupjongkhar have appealed to government to reconsider the decision and are still waiting for a response.

“We’re doing everything possible to explore alternatives but will follow all the legal procedures if the company dissolves,” he said, adding they are hoping for a positive response so that the operations of factory can be normalised.

Meanwhile, an official from another plaster of Paris company said they have not yet decided to shut down and will wait for the government’s response.

“But if the response is negative, we might have to as well take such steps because the cost of production would be very high and it would be as good as shutting down,” the official said. “We won’t be able to compete with the Indian market because right now customers prefer our product because of low price.”

Subsidised kerosene was withdrawn last year but the government had revoked the decision.

Yangchen C Rinzin |  Samdrupjongkhar