Milco’s Narahenpita milk powder factory to move out of the city
Sri Lanka’s state-owned dairy Milco (Pvt) Ltd is now undergoing a major revival process with urgent capital and technological infusion to upgrade its four aging milk processing factories and improve hygienic standards, officials said.
The company will modernise it’s three factories at Ambewela, Digana and Polonnaruwa and re-locate the 55 year-old Narahenpita factory in Badalgama using Euro 33.4 million loan (Rs.6 billion) to be received from Denmark’s Nordea Bank structured by UK’s HSBC banking group, a senior official of the Finance Ministry said. This was also highlighted in the ministry’s 2012 annual report as well.
The aim is to increase production to 700,000 litres of milk a day from a current 100,000.
However according to the ministry annual report, the expansion in production and storage capacities needs to be managed prudently within a viable business plan attracting private sector investments and partnerships.
Meanwhile rejecting allegations of not following rules in obtaining this foreign loan, Milco Chairman Sunil Wickramasinghe said that the consent of all stakeholders had been given in 2009-2010 period and the recent cabinet and board approval was given in 2012.
He said that this was not a new loan as it was requested in 2008 under former Minister C. B. Ratnayake. He disclosed that the company will hand over the 19.8 acre land in Narahenpita where the old Milco factory is located to the Urban Development Authority for re-development.
He revealed that they were seeking the Danish loan to modernise three factories and re-locate the Narahenpita factory fixing modern machinery.
Mr. Wickremasinghe pointed out that the turnover of the company increased by 16 per cent to Rs. 5.26 billion but the increase in the average purchasing price paid to farmers for liquid milk to Rs. 50 per litre from Rs.32 per litre in 2011 resulted in an increase of direct costs by 25 per cent at Rs. 1 billion.
In 2012 out of the 68.5 million litres of milk purchased at a cost of Rs.3.47 billion, 800,000 litres (cost Rs. 40.5 million) had to be discarded as the company had purchased milk over and above its storage capacity in an effort to support farmers.
Under this set up Milco incurred a loss of Rs. 226 million in 2012 as against the profit of Rs. 83 million in 2011 due to increases in finance costs, sales and distribution costs, he said adding that the company has not increased the selling price of its’ products even under these circumstances.
As a result Milco increased its exposure to banks by Rs. 925 million in 2012.
The Treasury had to infuse Rs 166 million this year for the sustenance of the company, Finance Ministry sources said adding that this will enable Milco to turnaround its operations in the medium term and link with small farmer -milk collection centres for greater productivity.
Milco Vice Chairman Sanjaya Leelaratne noted that a former employee of the company who was sacked for his misdeeds is carrying out a campaign to tarnish its brand name.
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