Millions of rupees go down the drain at Embilipitiya mill
View(s):BT PROBE – Another Government deal turns ugly
An Australian-based firm entrusted with reviving a defunct state paper mill at Embilipitiya has abandoned the business without repaying a bank loan facility of over Rs.400 million, officials said.
Auslanka Paper Company (Pvt) Ltd was the local entity incorporated with Perth Engineering and Maintenance (WA) (Pvt) Ltd, an Australia based firm, to revive the paper mill at Embilipitiya.
Seylan Bank Plc, is now attempting to recover its Rs. 418 million rupee loan given to the Australian based firm, a top official of the bank said adding that they have already seized the property mortgaged to them. The company has also been given time to repay the loan before the assets are auctioned.
Around 100 employees at the paper mill lost their jobs due to the closure of the mill in April 2012, a trade union leader said adding that they were not paid any compensation.
He alleged that Auslanka Paper Co. has sold scrap iron, some parts of obsolete machinery and even cut down valuable trees for timber, before abandoning the premises.
Secretary to the State Resources and Enterprises Ministry Willie Gamage told the Business Times that the Embilipitiya paper mill owned by state-run National Paper Corporation was leased on November 2011 to Perth Engineering and Maintenance (WA) (Pvt). Ltd of Australia for a 30 year-period at a price of Rs.600 million under a redevelopment and revival plan for loss-making state enterprises through public private partnership.
He said the company had paid Rs.300 million out of the total lease amount of Rs. 600 million to the State Resources Management Corporation Ltd (SRMC) which was set up by the ministry to handle underperforming state enterprises through a loan facility obtained by Auslanka from Seylan Bank with a promise of paying the remaining Rs.300 million later.
In addition to their Rs. 600 million investment, they agreed to pay a 4 per cent annual lease rental for the utilization of the land, he revealed.
Now Dr. Gamage says the Australian investors have left the island claiming that the paper mill was not a viable entity.
He said that he has consulted the Attorney General’s Department as well as ministry lawyers with the aim of taking legal action against the company.
He disclosed that negotiations are underway with a prospective foreign investor to repay the loan facility obtained by the previous company from Seylan Bank and take a fresh lease on the paper mill.
A senior Finance Ministry official told the Business Times that the ministry has received a complaint on a Rs.100 million commission paid by Auslanka to a top official of the ministry and a probe is on in this connection.
When inquired about this allegation Dr. Gamage vehemently denied it saying that no one has taken any commission from the Australian company.
But he disclosed that that the SRMC received Rs.300 million though the Australian company had borrowed Rs. 400 million from the bank.
Seylan Bank in a local newspaper notice on 27th November 2012 stated its intention to auction equipment owned by Auslanka to recover the defaulted loan and interest at 31 per cent.
A factory officer said due to the poor quality of the machinery and the high cost of re-investing in machinery the plant was closed in April and around 100 workers were sent home without pay or other compensation.
Seylan Bank took over the premises deploying a security guard at the paper mill, he revealed.
Before the takeover of the paper mill in November 2011, a total of 172 employees, in service at that time, were made to retire under a Compulsory Retirement Scheme, after the payment of their due compensation and allowances.
They received around Rs. 750.000 each on average as compensation, he disclosed.
The government has made several attempts to resume production at the Embilipitiya Paper Mill but failed miserably, Opposition leader of the Thanamalwila Pradeshiya Sabha, K. Sumithapala told the Business Times.
The Embilipitiya paper mill was first set up in 1978. It was closed in 2003 and factory assets worth millions of rupees were sold to settle the workers’ dues.
The mill resumed operations in 2008 with a capital investment of Rs. 35 million as envisioned in the Mahinda Chintanaya to make state resources productive.
However, due to the poor quality of the machinery and the high cost of re-investing in machinery the plant was compelled to close again in 2010. (Bandula)
Follow @timesonlinelk
comments powered by Disqus