Punja blames Fiji government policies for $6.4m loss

http://intelligentsiya.blogspot.com - October 27, 2009

Leading Fiji business figure Hari Punja has blamed State price control measures and what he says were arbitrary government decisions on duties and import policies for a $6.435 million annual loss suffered by the Flour Mills of Fiji Group, of which he is chairman.

Group chairman Hari Punja has described the loss for the 2009 financial year as “significant”, following a group before tax profit of $6,526,720 in 2008.

“The principal cause of this loss is the unfair treatment we continue to receive from the Prices and Income Board (PIB) and the arbitrary decisions of government in regard to duties and import policies,” said Punja in the group’s annual report.

He said the results were also affected by having to write off the value of the group’s rice milling assets and its discontinued water business.

“In the first half of the year we were constantly battling to have the price of our flour and rice adjusted in accordance with rising world prices. The constant delays in approving price adjustments by PIB resulted in mounting losses. This situation was then exacerbated following the devaluation of the Fiji dollar by the Reserve Bank. Overnight the cost of our raw materials increased by more than 20 percent and we were not able to pass on this increased cost for a considerable period, during which the group was incurring a loss of more than $ 1 million per month,” Punja said.

“Also during the year the government decided to arbitrarily reduce import duty on white rice from 15 percent to zero. There was no prior consultation and as a consequence we were in the unfortunate position of having to honor forward contracts for brown rice at a considerable loss.”

As a result, FMF Group subsidiary, the Rice Company of Fiji, has reported a loss $113,182 this year, down from an after tax profit of $2,164,375 last year.

Punja has called on the government to make policy and duty changes which affect local manufacturers only after consultation and with a reasonable period of adjustment.

He said the group had repositioned its subsidiary Rice Company to deal with the new import policy. However in the process they had stopped milling brown rice resulting in loss of jobs and a write off of machinery values.

“If it was the government’s intention to lower the consumer price of rice then they have failed. The lower price of rice which the consumers of Fiji are enjoying now is the result of low international prices and not because of the change in duty structure of rice.”

“On the other hand, these actions have resulted into government losing a considerable amount of revenue and making it almost impossible for local rice farmers and millers to survive.”

“These arbitrary decisions of government both present and past have been a constant frustration for us and other manufacturers,” said Punja.

He said the group had seen a very healthy growth in exports of biscuits and other products which stood at the $50 million mark this year and were expected to grow to $60 million in the coming year.

Punja said as operations were stabilised in the past few months and products and activities rationalised, improvements had flown through from these decisions and the company and its subsidiaries had recorded a reasonable profit in each of the first three months of the new financial year “and we expect this to continue for the rest of the year”.

For the 2009 financial year ending in June, another FM subsidiary, the Atlantic and Pacific Packaging Company Ltd’s profit after tax increased from $237,858 to $560,956 while turnover increased from $5.788 million to a record $7.108 million