Karnaphuli Paper Mills in crisis with 5,000-tonne unsold paper

The state-owned Karnaphuli Paper Mills (KPM) is facing difficulties as a large quantity of the produced paper remains unsold due to the decreased demand from government organisations, its main customer, amid the pandemic.

About 5,000 tonnes of paper worth Tk50 crore, produced a year ago, is lying unsold in the warehouse, said a KPM official. 

"If we do not get buyers within the stipulated time, there is a risk that the unsold paper will be ruined, causing losses," said HM Anisuzzaman, commercial manager of the company.

Due to the decrease in sales, the company cannot repay the loan taken from the Bangladesh Chemical Industries Corporation (BCIC), said sources at the company.

The KPM took out a Tk27 crore loan from the BCIC last year to import raw materials. They produced paper as planned, but the demand for products at government organisations, including the National Election Commission and various public universities, declined due to the Covid-19 crisis.

The National Curriculum and Textbook Board (NCTB) has stopped purchasing paper from the KPM during the crisis. Although the BG Press currently buys a limited quantity of paper from the KPM, the latter's stock is growing every day, leading to a major financial crisis, said company officials. 

One of the largest paper mills in the subcontinent lagged behind commercially due to the establishment of paper mills in the private sector and paper imports in the last two decades. To avoid the crisis, the government directed agencies concerned to purchase all types of paper from the KPM for government work. 

A handful of institutions have been complying with the directive of the Prime Minister's Office, but most of them are not. Consequently, the company has been suffering losses every year instead of making profits, said KPM officials. 

They said the KPM has continued production in consultation with the BCIC, the industry ministry and the finance ministry to reduce losses gradually after last year's lockdown ended. 

The daily production capacity of KPM is 70-80 tonne, but currently it is producing only 8-10 tonne per day. Despite reducing the production, unsold paper in its stock is piling up.

The KPM's highest production in recent years was in 2016 – 80 tonnes daily. At that time, they sold around 15,000-16,000 tonnes of paper in a year.

But corruption, mismanagement, and failure to renovate the factory on time have reduced the efficiency of the long-running paper mill. The production cost is exceeding the market price as the factory has been operating at one-sixth or one-seventh of its capacity. All these factors are contributing to the company's big losses every year, said the officials. 

The factory currently employs 225 permanent and 300 temporary workers and its monthly expenditure is at least Tk5 crore including the salaries of the employees and workers.

It needs to produce and sell at least 1,500 tonnes of paper per month to make profit after bearing all expenses, but, currently it is producing only 300-350 tonnes per month, said officials.

Pakistan Industrial Development Corporation established the Karnaphuli Paper Mills in 1953 at Chandraghona in Kaptaiupazila of Rangamati district.

Due to initial shortcomings in its management, the Pakistan government in 1964 sold KPM to Dawood Group, which modernised it. When Bangladesh became independent in 1971, the Bangladesh Industrial Development Corporation acquired the paper mill.