The steel factory owners are seeing this as indicative of the government’s willingness to help. But the minister has not given away anything yet, only that they submit a “report” to the government. The owners says that they are in desperate need of working capital as theirs had been spent on raw material and the returns had dwindled because of the world financial crisis, which sucked the money from the market. In other words, there was a credit crunch.

“The problem of working capital, if not solved sooner, can lead to a shutdown of the industries,” said an industrialist at a meeting with Lyonpo Khandu Wangchuk. In terms of employment and revenue to the national exchequer, which steel owners say they help generate, the success of the industries and the investors was important and that, at the moment, working capital was integral to their survival.

“Our proposal is that we want the government to talk with the financial institutions to consider bridge loans,” said Letho, the secretary general of the association of Bhutanese industries.

According to the owners, they were referred to Druk holding investments, when approaching Bhutan power corporation for consideration on power tariff and penalties in the wake of the current crisis. When seeking of the banks a bridge loan, owners say, the prudential regulation of the royal monetary authority (RMA) became a problem. “We’d like the government and the ministry to be a bridge between the concerned agencies and us to revive the falling industries,” said a steel owner.

They have a loan debt of around Nu 1.6 billion from individuals as well as consortium loans. They were also among the top ten largest borrowers in Bhutan. However, according to the prudential regulation of RMA, the aggregate sum of 10 single largest borrowers should not exceed 30 percent of the total loans and advances. Lyonpo Khandu Wangchuk has said that the government will look into the matter.

The owners have put up a proposal to waive the prudential regulation for at least 3 to 6 months. “In my case, we’ve reached a situation of hand to mouth survival and almost all of us will have to shut down our industries if something’s not done sooner,” said a woman industrialist.

They pointed out that they are not at a loss because of no market. “We have a market but the only thing we don’t have is working capital, due to the current global crash crisis. We’re confident that we can recover our losses if we could have the capital to start full production,” said Ugyen, a steel manufacturer.

Steel owners said that they had purchased in bulk raw material at a high rate when the price of steel was high and, when they started production, the prices suddenly dropped, causing them huge losses.

Kuensel Newspaper

The ngultrum has depreciated by 15 to 18 per cent against the dollar in the past two months, with one USD now equivalent to Nu 49.30.

“This has increased our import bills, production costs, debt servicing and the balance of payments situation,” a finance ministry official said.

“The constant decline of the ngultrum against the dollar is making third country imports expensive, especially for those that use technology and raw material from them,” an expert said, adding “this could affect the future growth of such businesses since in 2007 goods worth Nu 5 billion were imported from these third countries.”

Even the government budget will be affected with more money needed for electronic imports like computers.

An MP whose son is studying in Bangkok said, “I had to pay an additional Nu 25,000 this time for my son’s fees due to the exchange rate.”

This is expected to affect trade diversification with importers focusing more on imports from India, putting further pressure on the rupee reserves.

Bhutan’s exports have already taken a hit with some steel industries closing down, since Indian steel has less international buyers thus creating a domestic glut and falling prices, the state-run newspaper Kuensel reported.

Even after excluding Bhutan’s debt to New Delhi, the debt owed to other development partners, mainly in dollars, is Nu 16.5 billion.

Express India