SMCL plans to bring in a third big buyer from Nepal to break the Duopoly

The State Mining Corporation Limited (SMCL) rocked by corruption allegations and an ACC investigation into its export of Gypsum to Nepal is planning to bring in a third major buyer to try and break the Duopoly or the Nepal Gypsum Syndicate.

The SMCL is likely to put up the name of the third buyer in the next SMCL board meeting.

Currently the two main Nepalese buyers of Gypsum from Bhutan are Arvind Emporium and Jagdamba who buy Gypsum from Bhutan at relatively cheaper rates and sell them at a much higher rate in Nepal.

On the Nepal end this duopoly has maintained a joint monopoly on the supply and prices of Bhutanese Gypsum in eastern and southern Nepal.

They are also the main linchpins of the Nepal syndicate wanting to maintain an exclusive iron grip on Bhutanese Gypsum in Nepal with accusations of some fellow colluders from within SMCL.

Earlier in September 2019 the SMCL senior management had tried to break this duopoly by supplying Gypsum to two smaller players in a Saroj Yonzon and Sonal Tshering by giving them around 1,000 MT each of Bhutanese Gypsum to sell.

However, the syndicate on finding that Bhutan had sold outside its duopoly hit back in October 2019 by making a big issue of it and then declining to take any Gypsum from Bhutan. SMCL’s gypsum sales crashed in that month and it had to revert back to the big two.

The problem of a duopoly for Bhutan is that in the absence of competition, Bhutan will never be able to discover the true price of its gypsum in Nepal and be beholden to these two buyers.

The Nepal market was around 36,000 MT around six years ago and it is now around 200,000 MT.

The two big buyers officially buy Gypsum from Bhutan at Nu 2,015 per MT but in Nepal this is sold at anything form Nu 6,000 per MT to even Nu 8,000.

A senior official in SMCL said that the Nepal duopoly are not only traders but also own some big cement plants and hence they dominate the market.

He said that bringing in only small new players can lead to them being ‘killed’ by the big players and so a third big player is needed to challenge the duopoly.

The senior official said that the SMCL board will have to be willing to take the risk of a temporary slump in sales as the duopoly hits back by not buying to pressurize Bhutan.

A former DHI official on the condition of anonymity said that the best way forward is for SMCL to open up its operations to more buyers so that if there is any duopoly or or other collusion then it can be stopped.

He said that the Gypsum from Rajasthan that comes to Nepal is of an inferior quality and the Oman Gypsum that is imported is more expensive. He said more buyers and competitors for Bhutanese Gypsum will mean that Bhutanese Gypsum can find its real value. He said there is a huge demand for Bhutanese Gypsum in Nepal.

The former DHI official said that Bhutan should aim to sell directly to buyers in Nepal which will eliminate middlemen and possibly get better prices.

He said it is also important to break through any fear factor selling to more buyers in Nepal as this fear factor in part maybe encouraged by a few within SMCL.

He said that while the government asked SMCL for seamless operation it does not mean sticking to the current buyers but it is also okay to lose old buyers as long as sales go up.

The idea for a third buyer was there from December 2020 itself but the proposal will now receive more impetus after allegations of corruption and an ACC investigation.

A complainant on 1st March 2020 had put up a complaint to the ACC alleging massive corruption in the sale of Gypsum from Bhutan and also in its transportation. The complaint named the SMCL General Manager Marketing and Sales, Sangay Rinzin and SMCL Marketing Specialist Kumar Pradhan.

This paper did a series of investigative stories which showed people from Nepal coming forward to share that Gypsum was sold at Nu 6,000 to Nu 8,000 per MT with allegations of commissions being given to SMCL staff by the Nepal syndicate.

As many 14 truck drivers who ferry Gypsum to Nepal also complained about Nu 3,000 or more being cut per truck per trip in Bhutan by a local transport company East Bhutan Private Limited (EBPL) where the SMCL Marketing Specialist Kumar Pradhan is a founder and shareholder.

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