After losses for seven straight years the Food Corporation of Bhutan Limited (FCBL) has managed to make some profit in its first two quarters or six months. In the last seven years from 2016 to 2022 FCB made a total loss of Nu 153 million.
From January to June 2023 FCBL has made a profit of Nu 10.8 mn before tax as against the projected loss of Nu 14.7 mn.
Last year during the same period FCBL had made a loss of Nu 65 mn.
FCBL CEO Dorji Tashi said, "We have made profit and savings after seven years of losses. Even until last year there were losses due to socially motivated programs like Farm Shops ate the lion's share of the profit. It was not from the general business. The subsidy was only for the socially motivated programs. We started making profits from the first two quarters. We closed farm shops last year. The transformation exercise found that buy back is not sustainable and put the recommendation to the MoAF which stopped it."
He said in the case of buy back the subsidy was given to FCBL and the government was supposed to compensate FCB for any operational costs and losses and service charges but in reality this did not happen.
In the case of Farm Shops FCBL had been promised compensation but even after four or five years of losses and them writing for compensation, the government was not able to provide it.
The difference now is that FCBL is able to do business as per its own plans.
The CEO said the new directives from the government and especially Ministry of Finance is very clear.
"We have to first be profitable and the social mandate comes after that. We are strictly following that but there are social mandates we do simultaneously like making essential food items available across the county and ensuring the national food security reserve. We make money out of this but it is a social mandate. Secondly, our mandate is to stabilize the price margin as the FCB margin ensures that private businesses do not overcharge otherwise they will lose customers to FCB. The third mandate is the export of agricultural products like cash crops like potatoes etc regardless of the market conditions. 55 to 60 percent of Bhutanese depend on agriculture for their livelihoods."
He said that according to MoF if FCB or any other SOE gets certain directives (like Farm Shop and Buy Back) from the government then it needs to be carefully deliberated between the agencies and that needs to be put to the board, and that needs to be adequately supported by the fund. MoF then needs to write to the cabinet.
In fact, the FCB position has improved so much that it is confident that it can afford the pay hike.
The MoF has asked for three options from every SOE.
Here the FCBL CEO said their first option is to provide a salary hike like the civil service with cost savings and no additional funds. He said they will make up funds from the resource optimization and plan to adjust the expenses and resources.
"We have done quite well that this year and can afford the fifty percent hike and after the salary hike if we continue the performance for 6 more months then we will make some modest profits after 7 years of losses," said the CEO.
The second option is to give a 25 percent hike until December and the remaining 25 percent in January 2024. The third option is no salary increment till January 2024 and then give it at par with the government.