Kathmandu, December 8:

Prime minister Girija Prasad Koirala has recently directed finance minister Dr Ram Sharan Mahat to take initiatives in revitalising the financially-crippled Gorakhkali Rubber Udyog Ltd (GRUL), a public sector industry, established in Gorkha district 14 years ago.

Accumulated losses of the industry have crossed Rs 500 million mark. GRUL has been reeling under financial trouble for long, thanks to increased smuggling of tyres from China and India, sources disclosed to The Himalayan Times today.

A proposal from the ministry of industry, commerce and supplies has been recently submitted to the ministry of finance (MoF), urging the government to inject at least Rs 40 million to revive the industry, sources disclosed.

Despite tremendous market potential and demand at home and abroad for tyres, the company has failed to live up to its potential. Even if it produces 50 per cent of its total capacity, it can meet domestic demand and products can be exported to India and Bangladesh.All political parties’ representatives have already agreed in principle to rescue the troubled tyre company, Nepal’s only industry of its sort, with an injection of additional capital.

However, ministry of finance officials reacted extremely negatively to the demand from the industry ministry. MoF officials disclosed that the GRUL has already gobbled up Rs 510 million six years ago and the current demand for money will be unbearable for the national exchequer. GRUL has an initial investments of Rs 430 million from the government and other institutions.

The company currently produces only upto 38 per cent of its total capacity and has given employment to 421 people. In it, 34 per cent shares belong to the government, 11 per cent to the Asian Development Bank, 21 per cent to government institutions and the rest 34 per cent, to the public.

The industry imports over 70 per cent of its raw material to produce tyres, which has been a huge financial drain, according to ministry sources.

Although the company used to produce over 40 per cent of its total capacity, the more recent GRUL management has failed to effectively manage its resources.

Now meeting the working capital requirement may revive the sick industry, hoped government officials.