DHI & Group contribute Nu 13B in 2018
May 22 | Kuensel
By Tshering Dorji
The Druk Holding and Investments (DHI) and its group of companies contributed more than Nu 13B to the government exchequer in 2018 through dividend, taxes and royalties.
However, the DHI group’s comprehensive income for the year decreased to Nu 36.5B, a drop of six percent. This is attributed to the worst hydrology in Wangchhu since 2008, impacting the revenue of both Druk Green Power Corporation (DGPC) and Bhutan Power Corporation (BPC).
The total income from energy and resource segment of the group decreased by nine percent last year.
Decrease in income and marginal increase in expenditure resulted in DHI group’s profit after tax to slide by 31 percent, from Nu 6B in 2017 to Nu 4B last year. However, despite the drop in profitability, DHI group’s tax payment increased from Nu 5.9B in 2017 to Nu 6.9B.
The DHI’s annual report stated that there is no negation to tax payables, which means tax payables of profitable companies, cannot be offset against the losses of others. This also implies that the DHI and Group was levied with effective tax rate of about 62 percent.
DHI, earlier had raised concerns regarding the double taxation on dividends. For instance, a subsidiary company is imposed with income tax on the profit and dividend is remitted to the parent company. This is reflected as income of the parent company and again taxed.
In the resource segment, the Natural Resource Development Corporation Ltd. (NRDCL) has come out of the Nu 61M in red to upscale its profit to a tune of Nu 39M.
The Bank of Bhutan despite the implementation of minimum lending rate registered a record profit in its history of more than Nu 1B. The Bank’s dividend to the DHI also saw an increase of 15 percent.
The second largest contributor of revenue was the communication and transport segment, which includes Drukair and Bhutan Telecom.
Bhutan Telecom also marked one of the highest profits among the group while Drukair continued its profit spell for the third consecutive year. The airline company is also looking forward to bring in a new airbus A320 in 2020 and another ATR aircraft next month.
The Thimphu Techpark achieved an occupancy rate of 98 percent and generated jobs for 454 youth besides registering a profit of about Nu 11M. Construction Development Corporation Ltd. (CDCL) saw a profit of Nu 5.6M after tax.
Despite the progress, DHI’s companies along the southern foothills are still struggling to come out of the red. Both Dungsam Cement and Dungsam Polymers registered a loss of Nu 30M and Nu 0.6M respectively.
However, this can still be construed as an achievement compared with the past. Dungsam Cement recovered from a loss of Nu 513M in 2017 and Dungsam Polymer came out from Nu 6.5M in the red. This can be attributed to the financial restructuring initiated in the past.
The State Mining Corporation raked up a profit of Nu 91M, up from Nu 67M in 2017. This is a result of increase in coal production by 60 percent from the two mines.
Into the next decade
While a major share (85 percent) of the contribution to the DHI comes from the electricity based companies, the chairman of the DHI,Dasho Ugen Chewang during a press conference said that the holding and investment arm of the government is not limiting itself to what rain and clouds give.
“The Nu 13B contribution to the government exchequer is not the end of story. We commit to build our future appropriately through strategic plans and translate knowledge into opportunities,” he said.
The DHI has targeted to finance the entire current expenditure of the government by 2030. According to the projections, the country’s current expenditure is estimated at Nu 69B while the DHI estimates a contribution of Nu 79B from taxes, royalty and dividend.
To this effect the DHI plans to undertake economic diversification. Even the power and construction companies are preparing or have already taken up tasks to explore opportunities.
The DHI, Dasho Ugen Chewang said will strive to upscale contribution from non-hydro sources, if not bring at par. For this reasons, he said companies like SMCL should be transformed to manage the resources efficiently and CDCL to build hydropower projects overseas, for instance.
The DHI also plans to take the Bhutan Future Fund to Nu 30B in 2030.
Come next decade, investments in space technology, block chain, artificial intelligence and data analytic are also in the DHI cards.
He said that most organisations under DHI are set up to perform within the bounds of law and provide valuable services. For instance, he said the services of BoB and Drukair are far better than other service providers.
Owing to the strong corporate governance culture in the DHI, its companies are highly efficient compared with the government owned state enterprises.
However, major investments slated for the decade will have to battle policy and regulatory challenges, including those related to finding appropriate partners and investors, given Bhutan’s small economy.