The government is set to decide on disinvesting the state-owned Dhaka Leather Company (DLC) Ltd next month under public-private partnership (PPP) model in a bid to get rid of its huge liabilities and losses in the past 15 years, an official said.
The Industries Ministry has formed a committee in this connection to scrutinise which of the four PPP models will be viable to divest the company that was established under joint venture with former Czechoslovakia with 40 per cent equity of Bangladesh.
The initial investment was Tk 610 million with an annual production capacity of processing 3.15 million sq ft cow hides, 6.10 million sq ft goat skin and 0.45 million sq ft split leather.
But the company was closed after six days of its operation in 1994-95 on the ground of scarcity of raw materials.
Later, the company was run under sub-contracting which also proved not so viable as the outside companies could not pay for the huge operational expense finally leading to its closure in 1998.
The government has decided to re-run the DLC under PPP to get rid of its huge liabilities and make it commercially viable. A committee has been formed to oversee under which of the four PPP model will best fit for divestment of the DLC," said the official seeking anonymity.
He said the company cannot be run under the Build-Operate-Transfer (BOT) model of PPP as the factory is already established.
"We mainly need investment for operation and marketing from private investors. The committee will give its decision by the end of this month," he added.
The government first invited tender for the disinvestment of the DLC in May 2008 which was opened in August where valuation was more than Tk 774 million including permanent and current assets.
Only two tender documents were dropped at that time where the lowest bidder quoted more than Tk 420 million.
The tender committee found that the cost was 55.18 per cent of the quoted price and cancelled the tender process.
Later, the second tender was invited where no bidder dropped tender documents. Although the decision was taken to go for the third round tender, the tendering process was cancelled against opposition from the Industries Ministry.
Meanwhile, an audit report on the DLC obtained by the FE shows that the company was established on 18 acres of land. About 12.50 acres land was unused as it was not utilised as per the master plan, said the official.
The audit report showed the cumulative losses incurred until 30 June of 2007 was more than Tk 516 million, while the total value of property was nearly Tk 790 million, total liabilities more than Tk 1.02 billion, net worth more than Tk 236 million, total value of land including trees more than Tk 268 million.
The ministry official said at present 26 personnel have been working in the DLC and the government needs at least Tk 0.2 million every month for security and utility services. There are four security personnel, 12 ansars, two permanent staffs, five casual staffs and three officers working there.
He said the valuation was done by the Privatisation Commission long ago. Now the price of the land has increased manifold.
When sought his comment on the wastage of public property like the DLC, managing director of Picard Bangladesh, a Bangladesh-Germany joint venture leather group, Saiful Islam told the FE that the government's decision to go for commercial ventures was a wrong one.
There was never any scarcity of raw materials in leather factories in Bangladesh. It was the government's bureaucracy and decision-making process that contributed to failure to run the DLC, he said.
According to Mr Islam, the present decision of the government to run the Dhaka Leather Company under PPP is also a wrong policy as PPP with the government is never viable for running any commercial venture.
"The DLC will not be protected without privatisation. The government should immediately invite tender after valuation at the current price which will give the government an instant fund and speed up the factory production," said Mr Islam.
