… following withdrawal of subsidised kerosene

Following the withdrawal of subsidised kerosene, another two plaster of Paris manufacturing plants, Barma Chemical Industry (BCI) and Bhutan Gypsum Pvt Ltd (BGPL) have shutdown.

BGPL, which is located in Samdrupjongkhar was shutdown on March 27 while BCI in Pemagatshel closed shop on March 31.

The closure of the two plants follows Druk Plaster and Chemical Ltd shutting down last year and laying off almost 90 percent of its staff.  The three companies are the only plants that manufacture plaster of Paris in Bhutan. Most of their products are exported to India and the rest used locally.

However, Druk Plaster and Chemical Ltd being a public company, its CEO Kuenzang Leki said they are still in the process of winding up operations as they require their shareholders’ acquiescence. But the company will be ultimately shutdown as their appeal for susbsidised kerosene was not accepted, he said.

The shutdown has forced companies to lay off employees. Druk Plaster and Chemical Ltd laid off at least 19 employees, while BGPL laid off at least 18. BCL laid off at least 25 employees. Some employees, such as administrators and those with technical backgrounds have been retained for now.

There are also concerns about how the companies will be able to repay loans taken from the financial institutions.

Officials from the companies said that various alternatives such as using diesel fuel were explored, but it was found not feasible given costs and the increasing the cost of production. Switching to diesel would also require change in some equipment which would entail significant costs, they said.

Distribution of subsidised kerosene to plaster of Paris manufacturers was withdrawn in July last year because of the significant financial implications on the government.

The monthly requirement of subsidised kerosene was about 108 kilolitres for the three companies combined. Although they received subsidised kerosene, the companies used to pay an additional 50 percent commercial tax, which came to about Nu 22.5 per litre of kerosene. But switching to diesel or buying kerosene at the commercial rate means the price would be around Nu 57, excluding the price of transporting the fuel from Phuentsholing.

The companies last year appealed to the economic affairs ministry several times to reconsider or revoke the decision. However, the ministry only agreed to extend the subsidy until December 31 last year.

“But the extension was agreed only after we were made to submit a written agreement with the condition that we won’t appeal to any authority for subsidy after that,” BCI general manager Kinzang Wangdi said. “We didn’t have any options then to sign and agree so that we could at least utilise what we get until December to run on available stocks before we completely shut down.”

He added although they cannot appeal, an option could have been to increase the commercial tax by 25 percent instead of doing away with the subsidy. Using coal was another option but use of the fuel is not allowed in Bhutan.

BGPL general manager Lhundup Tobgay said given lack of funds the company had to be shut down and employees laid off. “It would be hard to compete in the Indian market since the price of our product would increase. The Indian market today prefers our products because of low price and good quality,” he said.

Kerosene is one of the raw materials that goes into making plaster of Paris. It is used to heat crushed gypsum.

Kinzang Wangdi added they have submitted a letter to National Environment Commission seeking its approval to use tyre oil with kerosene. If approved the plants would be able to continue operating, he said.

Lhundup Tobgay added that the company since its inception was running on a loss and just when it had started gaining a profit, the kerosene issue arose.

Officials of the three companies, however, said they are still exploring other opportunities and alternatives to restart the factory but until then the plants will remain shutdown.

Yangchen C Rinzin | Samdrupjongkhar