The head of Nepal Dairy Development Board (NDDB) revealed Tuesday that a plan to rescue troubled Chitwan Milk with government financing and management had fallen through after the Ministry of Finance (MoF) rejected it.
“Nine months ago, we had proposed to the government to allow NDDB to operate Chitwan Milk with the government holding a majority stake in it. The Ministry of Agricultural Development (MoAD) approved the proposal and then forwarded it to MoF,” Babukaji Panta, the executive director of NDDB — the government’s policy-making body for dairy development, told Republica. “Then four months ago, MoF informed us that the proposal had been rejected.”
Chitwan Milk, which had the largest powdered milk producing capacity in the country, stopped production indefinitely on August 26 citing its failure to compete with comparatively cheaper imported powdered milk brands after global milk prices came down heavily.
NDDB had then appealed to the ministries that Chitwan Milk, was on verge of shutting down, was vital to Nepali milk producers as it cut the possibility of milk holidays. NDDB had proposed to MoAD and MoF that it would operate the dairy in a public private partnership (PPP) model, with government taking 51 percent share. “We had accordingly prepared the working paper. We had proposed that the executive director of NDDB would remain the chairman of the management committee which would now have members from MoF, MoAD and Dairy Development Corporation,” Panta said, adding: “However, we could not move ahead following MoF’s rejection.”
Chitwan Milk came to operation in 2009. The state-owned DDC held 11 percent of the shares and the rest of held by Chitwan Construction & Engineering Co Nepal Pvt Ltd (Chitwan Co-E Nepal). The company’s plants to process 150,000 liter of milk every day and had been producing 15 tons of powdered milk on one average on daily basis.
But the dairy started finding it difficult to compete after a series of drops in the price of powdered milk in the international market while Nepal’s customs duty remained unchanged.
Due to the availability of foreign-made powdered milk at cheaper prices, Chitwan Milk had a stockpile of powdered milk worth Rs 300 million. As a result, the dairy was also finding it hard to pay farmers.
The dairy finally announced it was stopping production, posted a notice about it at the factory premises and sent its workers home on unpaid leaves for four months.