The Sunday Leader

MILCO Factory Facing Closure

By Nirmala Kannangara

Sunil C. Wickramasinghe

Controversy surrounds the manner in which the Milk Industries of Lanka Company Private Ltd (MILCO), which was once a profitable institution, has been converted into a cash strapped establishment.

Accusations have also been levelled against Livestock and Rural Community Development Minister Arumugam Thondaman for using MILCO funds for his personal benefit and for allowing MILCO Chairman, Sunil Wickremasinghe to ruin the institution.

Meanwhile, MILCO employees, now in fear of losing their jobs as the company has faced steady losses over the past year or so, said that the continuous waste of money in the guise of development work could result in the closure of the institution.

“Unless the company gets a good administrator who can manage finances, MILCO will be closed down,” said the employees.
The purchase of two units of Ultra High Temperature (UHT) milk processing and packaging plants in 2011 has raised much concern amongst the employees who claim it is a white elephant.

“These machines were purchased from International Stainless Steel Fabrications Pvt Ltd which is a blacklisted company. Although the market price per unit at that time was Rs.220 million, it is questionable as to why MILCO paid Rs.357 million per machine. We were told that this deal was finalized at Minister Thondaman’s residence in India,” alleged the employees.
According to them when quotations were called there were lower bids but surprisingly it was offered to the highest bidder, an Indian company.

“The purposes of purchasing UHT machines are for the sterilization of milk using extreme heat at levels capable of killing the spores in milk. Although it was claimed that these machines could sterilize with a shelf live of 30 days, the production cannot last even 14 days.

“We have received many complaints about these UHT milk packets as within 14 days of the production most of the packets get bloated and there were instances where there were worms and even the taste changed into sour. If these machines could sterilize the milk properly then there would not be such issues. We are puzzled as to whether we have bought substandard machines. Although we purchased the machines in 2011, the machines have been manufactured in year 2000. Why couldn’t we purchase these machines that were manufactured in year 2010 which were available in the market at the time we made the purchase? Instead of paying a lesser amount and buying a newly manufactured product, MILCO paid exorbitant rates to purchase 11-year-old machines,” they said.

They further observed that although one machine could produce 4,000 liters of UHT milk and if both plants were operated for 10 hours which is the standard limit, 80,000 liters of UHT milk could be produced per day.

“Although it was as such, the daily production per day is 40,000 liters, which is a loss to the company,” they said.
Meanwhile, the decision to obtain a loan of Euro 33.4 million from Nordea Bank Denmark for the modernization of processing facilities in the four MILCO factories and twenty milk collection centers too have raised eyebrows.

Reliable sources from MILCO on conditions of anonymity alleged that Chairman Wickremasinghe had signed an agreement with the bank to obtain the said Euro 33.4 million without Cabinet approval and leaving the board of directors without any knowledge about it.

“Why is this rush to obtain such a big loan without a board approval? The company over the past one year has incurred losses after losses and how could we repay the loan when there is no money,” said the sources.
According to sources, the two board directors who have been appointed by President Mahinda Rajapaksa too have not been informed about the loan.

“Chairman Wickremasinghe has taken the upper hand on Minister Thondaman who is boasting that he can make or break any government at any time. That is why the Chairman is not taking the Presidential appointees into account. Minister Thondaman also once claimed that he would be the Minister of Livestock and Rural Community as long as he is in politics and that his son would be replacing him in this same ministry after him,” said the employees.

However, a member of the MILCO Board on conditions of anonymity confirmed to The Sunday Leader that his approval was not sought to obtain te Euro 33.4 million loan, although the Chairman had claimed that he obtained board approval on December 27, 2012.

“This is completely misleading. Long time ago we were told that there is a plan to obtain a loan to modernize the processing facilities but never obtain our consent as stated by the Chairman. This is not the first time that decision has been made without the board approval,” he said.

Meanwhile, Attorney at Law Chandana Jayatissa of the Tangaraya movement that protects government institutions against frauds and corruptions said that he had found out that any person loyal to Chairman Wickremasinghe is allowed to steal and engage in corruption.

“Knowing the fact that the employees will question the Chairman as to how Euro 33.4 million was obtained even without a board approval, promotions and salary increments were given to trade unionists irrespective of their parties. Even though the company sustained heavy losses the Chairman still went ahead increasing the salaries of those he thought to be an obstacle for his plan and kept their mouths shut,” added Jayatissa.

MILCO sources further said as to how nearly 900,000 liters of liquid milk was thrown into drains from the four milk factories in Colombo, Polonnaruwa, Digana and Ambewela due to a detrimental decision taken by Wickremasinghe in 2012.

“There was a time when Nestle Company stopped purchasing liquid milk from the milk farmers. In order to safeguard these farmers, MILCO purchased all the milk that was produced at that time without having a proper plan as to how they would be transported, processed or the production capacity. Without evaluating these, MILCO bought the liquid milk stock to facilitate the 55,000 milk farmers. Helping the milk farmer is good but throwing 900,000 liters of liquid milk into drains is a wastage.

MILCO spent Rs.45 million for these 900,000 liters. Whose money is this? It is neither Wickremasinghe’s nor Thondaman’s but the people’s hard earned money. Who has given the authority for them to play out with our money?” said the sources.
According to them, if the MILCO Chairman had a proper knowledge about the milk possessing method – from the moment the milk is purchased till the final product is out to the market – this wastage could have stopped easily?

“MILCO claims that they did not have enough of processing capacity for the large stocks they bought. We challenge the management in that regard as we have the capacity but this was a complete sabotage. The Chairman appointed one of his henchmen to handle the fleet of milk bowsers. Instead of sending the milk straight from collecting centers to the closest factory, this officer sent the milk bowsers to far away factories. That was the sole reason to get the milk spoilt,” added the sources.

They further accused Wickremasinghe of leasing out the company’s cattle feed plant at Polgahawela without calling for quotations.

However, refuting allegations, Chairman MILCO Sunil Wickremasinghe said that he had not taken any decision unilaterally but collectively to obtain a loan for Euro 33.4 million.

“Who says that there is no cabinet decision and a board approval in this regard? Those who were not allowed to rob this institution are making baseless allegations. If they think that I am so powerful to get loans without government approvals, I am happy, as I am a hero in their eyes. It is the Treasury that signs the contract and obtains the money and they would be given to us. I do not know anything in this regard. I even do not know from which bank this loan will be taken. Everything is transparent,” said Wickremasinghe.

When asked as to why MILCO could not achieve their target after purchasing the two UHT milk processing and packaging plants and whether it is true that the shelf life of the product is only two weeks but not as expected, Wickremasinghe said that the shelf life of UHT pack is 60 days although MILCO gives a 35-day guarantee period.

“We are producing 40,000 liters of UHT milk every day from the two machines and although the technical shelf life is 60 days we give a 35-day guarantee period. We have never come across of any contaminated UHT milk products. This is all lies,” he added.

As for why the company is incurring losses under his administration, Wickremasinghe said that it was due to a good reason.

“When we were paying the milk farmer Rs.28 per liter, I was instructed to increase it to Rs.33 and then to Rs.50. Although we increased the purchasing prices we did not increase the sale prices of our products for a while. That was the reason for the losses,” added Wickremasinghe.

However he did not consider the Rs.45 million he spent to purchase more milk and subsequently throwing into drains as a loss but maintained that it was done to help out the milk farmers.

“How can you say that it was in vain for us to purchase those 900,000 liters of milk? When there was an excess milk production in the country and after realizing that their yield has not been purchased by Nestle, we had to help the farmers. In the Mahinda Chinthanaya it clearly states as to how we should help the milk farmers. Consider if that happened to you, will you scold MILCO or the government for purchasing your milk whether it is excess or not for MILCO,” said Wickremasinghe.

Meanwhile, Livestock and Rural Community Development Ministry Secretary Dr K. M. T. Kendaragama said that Cabinet approval had been given to obtain the loan but added that he was not aware whether the MILCO board approval had been obtained or not.

“I have to look into whether MILCO board approval is there for the loan,” he said.
According to Dr Kendaragama, the loan would be taken from a foreign bank, of which he did not know the name, but added that it is the MILCO that has to re-pay the loan.

“Since the efficiency of the machinery is not up to standard we decided to refurbish the factories. Once they are refurbished we will be able to double the processing capacity and increase the sales. Hence it would not be an issue for MILCO to re-pay the loan,” he said.

In the event of failing to go for the proposed target and generate profits to pay back the loan, the Ministry Secretary said that he did not know as to what would happen in such an event.

“There is no question the government will pay the loan but I do not know as to what the future of MILCO would be then,” he said.

When asked as to what was the delay in fixing the UHT plants, the Secretary said it was due to the lack of some machinery parts.
“It is true that no sooner these two plants were imported MILCO could not fix both plants immediately. The reason was that several parts had not come with the machine and we had to wait for about nine months to get the machinery parts and start work,” he added.

Dr Kendaragama also assured that he would look into the allegations made by the employees that the reason to throw away 900,000 liters of liquid milk was due to sabotage.

“Let the employees make the complaint and tell me why the milk bowsers were not sent to the nearest factory but to faraway factories, I will take stern action,” he said.

All attempts to get a comment from Minister Arumugam Thondaman failed. Although a message was left with Minister Thondaman’s security, there was no response from the Minister till the paper went to print.

Comments are closed

Photo Gallery

Log in | Designed by Gabfire themes