Travel  |  Business World  |  Women's World  |  Entertainment

Change Your Life!

State-owned GEM Plant in perils

News
Sports
Chat
Travel
Dhaka Today
Yellow Pages
Higher Education
Ask a Doctor
Weather
Currency Rate
Horoscope
E-Cards
B2K Poll
Comment on the Site
B2K Club

October 11, 2000 

Chitagong-- (UNB) – Despite having all potentials to grow as a vibrant electrical equipment manufacturing company, the state-owned GEM Plant in the port city of Chittagong is hurtling towards collapse due to staggering losses.

“The plant has been facing capital shortage since its inception and its luck will not last if its problems cannot be resolved soon,” said an official wishing anonymity.

As a government organisation, he said, the GEM Plant has been unable to compete with private firms because of its high overhead costs.

Set up in 1980, the company supplies electrical equipment, including transformers, to government organisations.

In a bid to prop up the sinking firm, Prime Minister Sheikh Hasina had directed all government offices and organisations to use electrical products of the company. But the PM’s order went unheeded as government organisations are still using the electrical products of other private companies in connivance with a section of senior officials.

As a result, the products of the company have lost competitiveness in the market and the plant has eventually turned into a sick unit.

Official sources said the firm has been supplying all electrical appliances, especially the transformers, since it went into commercial production in 1980-81. But it has never been able to utilise its full capacity due to lack of market for its products.

Another source at the plant said the cumulative loss of the plant now stands at Tk 90,93 crore since June 2000.

The firm, according to the source, is now under serious constraint of working capital, as it could not take fresh loan above the permissible limit of Tk 18 crore in June this year. At present it needs Tk 10 crore more as working capital.

In its original plan, the annual sale target of the company was set at Tk 47 crore with targeting the Power Development Board (PDB) as its main buyer. But the annual average sale of the company during the last 20 years was only Tk 15 crore while its average annual expense is Tk 12 crore.

Another official of the plant’s accounts section, who also spoke on condition of anonymity, said the management in its bid to overcome the existing crisis has fixed its sale target at Tk 28.0 crore a year.

He said 40 percent marginal contribution of the sale proceeds after deducting 60 variable costs could help lessen the fixed cost. “The existing liquidity crisis of the plant will continue if its sale target cannot be achieved,” he added.

The firm was able to reduce the loss to Tk 1.75 crore in 1999-2000 fiscal from Tk 10.0 crore in the previous fiscal by selling only 1000 pieces of 200-KVA transformers.

According to the sources, Dhaka Electric Supply Authority recently floated two tenders for procuring 1700 pieces of 200-KVA transformers and the GEM Plant participated in the bidding.

The GEM Plant proposed to supply transformers at a cost of Tk 1,67,250 each, but another private firm, M/s MAM Power Ltd, came up with a proposal to provide the same at the rate of Tk 1,47,900. DESA was learnt to have accepted the offer of the private firm as it has been the lowest bidder.

Sources said the GEM plant could not fulfil all conditions of the tender schedule, as it is unable to ensure service guarantee after the supply of its transformers.

Industries Minister Tofail Ahmed, visiting the plant on August 31, had directed the officials of his ministry to take necessary steps so DESA, PDB, REB purchase all electrical equipment from the company, an order perhaps went into the deaf ears.

More worrying is that machinery worth over Tk 7.37 crore imported from Russia in 1980 remained unused.