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Wasting public fund on sick SoEs

Shamsul Huq Zahid | January 11, 2019 00:00:00

It would be yet another example of wasting taxpayers' money on a sick state-owned enterprise (SoE).

A move, according to a report published in the last Wednesday's issue of the Financial Express, is on to spend nearly Tk 9.0 billion (900 crore) on the 80-year old state-owned Chhatak Cement factory, to 'revamp' it.

Not many people these days are aware of the existence of this cement factory which is now regarded more as a junk. Its production process is quite old and its machinery being outmoded deserves a place in the junkyard.

The cement factory was established in 1937 by a private party under the name Assam Bengal Cement Company Limited. But the state had to take it over as its owner abandoned it following the 1965 Indo-Pak War. After the emergence of Bangladesh its ownership went to state corporations and finally to the Bangladesh Chemical Industries Corporation in 1982.

Gone are the post-liberation days when people made long queues and lobbied hard to get a few bags of cement produced by the Chhatak Cement Company (CCCL) since there was no privately owned cement company during that period of time.

The situation is now completely different. The sector is dominated by private cement factories having an annual capacity to produce 50 million tonnes as against the total domestic requirement of about 30 million tonnes. The truth is as many as three dozen cement factories are now engaged in cutthroat competition. Some of the factories are even exporting cement.

The CCCL, honestly speaking, is a misfit entity in the country's cement sector. And a proposal has been mooted by the company high-ups to initiate yet another balancing, modernisation, rehabilitation and expansion (BMRE) project to raise its production capacity at an estimated cost of about Tk 9.0 billion.

But the financial performance of the CCCL has been surprisingly dismal since its coming under the control of the BCIC. After the transfer of its ownership to the BCIC, the cement factory BMRE projects were implemented thrice--- in 1985, 1987 and 2000. Its production capacity gradually was raised to more than 150,000 metric tonnes in the early 2000s. But its annual production again declined to 60,000 tonnes last year. The present capacity of the factory is equivalent to what was eight decades back.

The relevant authorities spent a handsome amount on BMRE projects, but the factory continued to incur loess and its aggregate loss stood at over Tk 4.0 billion between 2009 and 2018.

The developments centring around the CCCL, thus, amply indicate that the factory has no future. Anymore investment to revamp it would be mere wastage of resources. The government has already wasted enough taxpayers' money on it.

The factory also incurred a substantial amount of operating loss over the years. The government also had to make available funds from time to time to keep it running.

Besides, the cost of production of cement in the CCCL would surely be much higher than that of private cement factories.

However, what is happening with the CCCL is nothing unique. There are quite many state-owned enterprises (SOEs) that have identical track records and the government has been spending billions on them without any results. The sugar mills under the Bangladesh Sugar and Food Corporation are glaring examples. The cost of sugar produced by these mills is abnormally high.

The government should not spend public money on inefficient and loss-making SoEs for the greater good of the nation. When resource constraint remains a problem for bankrolling many essential development projects, the government's generosity demonstrated in the case of sick SoEs does not go well with the taxpayers. The policymakers should understand this simple truth.


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