annual report 2011 - natural resources … report 2011, natural resources development corporation...

NATURAL RESOURCES DEVELOPMENT CORPORATION Ltd.

རང་བཞིན་འཐོན་བསྐྱོད་གོང་འཕེལ་ལས་འཛིན་ཚད།

ANNUAL REPORT 2011

1Annual Report 2011, Natural Resources Development Corporation Limited

NATURAL RESOURCES DEVELOPMENTCORPORATION LIMITED

ANNUAL REPORT2011


TABLE OF CONTENTS

FOREWORD i

I. AN OVERVIEW OF THE ORGANIZATION 1

II. DIRECTORS’ REPORT 12

III. CHIEF EXECUTIVE OFFICER’S REPORT 22

IV. AUDITORS’ REPORT 24

iAnnual Report 2011, Natural Resources Development Corporation Limited

FOREWORD

It is with great pleasure that I present the NRDCL Annual Report 2011. As we all know, the main objectives of NRDCL is to make the natural resources “affordable, accessible and available”. Along these lines, I am proud to report that NRDCL has been successful in fulfilling its very important responsibilities of supplying natural resources especially timber, sand and stone at very affordable prices.

NRDCL is governed by both commercial and social mandates which are conflicting. Nonetheless, we have successfully managed to strike a balance between the two, without compromising on any one of them.

As would be clear from this Report, NRDCL has carried out and fulfilled its development and social mandates and at the same time, made a reasonable profit in 2011, which is necessary to sustain its activities and it would continue to do so. In 2011, while the physical production and supply has increased as compared to the previous year, the profit has gone down, which was mainly due to the sale of timber at reduced prices. This is a clear indication that NRDCL has fulfilled its mandates as per the directives of the Royal Government.

This unique characteristic of NRDCL, i.e., not being profit oriented, inspite of being one of the corporations under the DHI, has also been acknowledged by the DHI. There is a now general feeling and understanding among all the stakeholders associated with NRDCL that the performance of the company has to be assessed based on its competence, efficiency and contributions towards the development of the country’s natural resources and socio-economic development of our fellow citizens and not solely on its financial performance or profitability.

Through this Report, I take great pride in sharing our achievements and contributions during the year 2011, as well as our future plans to further improve our services, ensure the fulfillment of our mandates and make our humble contribution towards realizing the dreams and aspiration of our beloved leaders.

Lastly, I also take this opportunity to reaffirm and pledge our commitment to serve the public to the best of our efforts and make NRDCL one of the most coveted companies in the country.

Tashi Delek

(Gyem Tshering)ChiEF ExECuTivE OFFiCER


vision

Sustainable utilization and management of natural resources.

Mission

To ensure optimal utilization and management of natural resources on a sustainable basis and make such resources available, accessible and affordable to Bhutanese people and for country’s socio-economic development, and also find and promote alternatives to such resources.

Objectives

i. Management of natural resources with application of scientific and environmental friendly technology and methods.

ii. Engage in harvesting/extraction, processing, value-addition and marketing of natural resources through innovative and state-of-the-art technologies.

iii. Ensure judicious use and equitable supply of resources at affordable price(s).

iv. Develop valuable timber and non-timber species for industrial and commercial use.

v. Promote and develop effective alternatives to achieve both social goals and corporate objectives.

vi. Contribute towards rejuvenation of country’s forest cover and nature conservation.

Core values

NRDCL highly values the following core values which serve as critical factors for realizing the vision, mission and objectives of the corporation:

Transparency and Accountability: Be disciplined, transparent and accountable for our decisions, behaviors, attitude and results

integrity and honesty: Be fair, honest and ethical in what we seek to do and how we deliver as an organization

I. AN OvERviEW OF ThE ORGANiZATiON

2 Annual Report 2011, Natural Resources Development Corporation Limited

Productivity and Efficiency: Strive for high levels of productivity and efficiency

innovation and Creativity: Be creative and innovative in improving the services and technologies to realize our strategic goals (vision, mission and objectives).

Commitment and Teamwork: Be personally committed and take pride in working as a team with common values and goals

Respect and Fairness: Hold others in high esteem. All jobs and all people are important. Do not take advantage of people. View people as an end in themselves, not a means to an end. Behave in accord with our high standards of respect and fairness

health and Safety: Be conscientious in promoting the health and safety of our people, community and environment

Organization Structure

The NRDCL functions under the guidance of the NRDCL Board of Directors, appointed by DHI. The Chief Executive Officer is the overall in charge of the management and is directly responsible for the functioning of the company. He is accountable to report to the NRDCL Board for any support/guidance and important decisions.

The Head Office of NRDCL is located at Thimphu. The company has seven Field Regional Offices covering all the twenty Dzongkhags, each of them headed by a Regional Manager.

NRDCL Regional Offices & Dzongkhags Covered

Sl. No. Regional Offices Jurisdiction (Dzongkhags)

1 Jakar Bumthang

2 Phuentsholing Chukha & Samtse

3 Rinpung Paro & Haa

4 Sha Wangdue, Punakha, Tsirang, Dagana & Gasa

5 Wang Thimphu

6 Zhemgang Zhemgang, Trongsa & Sarpang

7 ZhonggarMongar, Trashigang, Trashi Yangtse, Pema Gatsel, S/Jongkhar & Lhuntse


ORGANOGRAM


BOARD OF DiRECTORS

ChairmanPhuntso Norbu

Joint Managing DirectorPunatsangchu (I&II) Hydroelectric

Project Authority

Director Yeshi Dorji

Geo-Technical Advisor Druk Green Power Corporation

DirectorDamber Singh Kharka

DirectorDruk Holding & Investments

DirectorTashi

ZimponwomOffice of Gyalpoi Zimpon

DirectorTenzin Chophel

Chief Planning OfficerMinistry of Agriculture & Forests

Member SecretaryGyem TsheringCEO, NRDCL

DirectorLekey Dorji

Chief Executive OfficerLD & Associates


MANAGEMENT TEAM


Products/Services

Currently, the NRDCL carries out the following activities:

a. Timber Production and Supply

b. Sand Extraction and Supply

c. Stone/Boulders Quarrying and Supply

d. Stone Chips Production and Supply

e. Reforestation Programs

f. Forest Road Constructions

g. Supply of Woodchips & Firewood

h. Production and Supply of briquettes

a. Timber Production and Supply

Currently, NRDCL is the sole agency mandated to harvest timber in the country. NRDCL supplies this harvested timber in log form to the domestic market. No timber is exported outside the country as our priority is to first meet the internal demand.

i. Production

The NRDCL implements the Forest Management Plans in approved Forest Management Units (FMU) and Working Schemes (WS) and works towards sustainable forest management for the benefit of both the present and future generations of Bhutan.

After the Forest Management Plans (FMP) are approved by the Government, the NRDCL implements them by building forest roads, planning and carrying out scientific harvesting operations, reforesting operated areas, etc.

NRDCL also implements forestry operations outside the FMUs to maintain the health and hygiene of forests, i.e. sanitation/salvage operations to remove over-matured trees, and diseased, insect attacked dead and dying trees to prevent epidemics.

To supplement timber supply and manage the forests on a sustainable basis, NRDCL also carries out thinning activities in collaboration with DoFPS.


Forest Management Units (FMUs) & Working Schemes (WS)

There are 17 FMUs and 6 WSs presently under implementation in the seven Regional Offices spread across the country.

Sl. No

Regional Office

Dzongkhag Forest Management unit

Working Scheme

1Rinpung

Paro Zonglela

Haa

Haa-East

Selela (Haa-West)

Bitekha

Longchu

2 Wang Thimphu Gidakom Zatola

3 Zhonggar

MongarKorila

Lingmithang

Trashigang Khaling-Kharungla

Trashi Yangtse Dongdeychu

Lhuentse Rongmanchu

4 ShaWangdue

Gogona Jogay

Khotokha

Dagana Tseza

5 ZhemgangZhemgang

Wangdigang Kikhar

Malaya

Trongsa Chendebji

6 Jakar BumthangDawathang Uruk

Karshong

Total 17 6

ii. Timber Supply

NRDCL markets timber as per Marketing and Pricing Policy of the Royal Government and the prices of logs and sawn timber are fixed by the Natural Resources Pricing Committee (NRPC).

Till November 2010, the sale of timber was conducted through Open Auctions where only Bhutanese citizens were allowed to


participate to purchase timber for use within the country. Such auctions were held almost once in a month in each of the seven Regional Offices. However, from December 2010, in order to regulate the rising timber prices, the timber disposal system was changed from auction to direct allotment through “lucky dip” foregoing huge revenue loss to the company but accruing greater benefits to the general public.

b. Sand Extraction and Supply

The operation and marketing of sand was nationalized in November 2007 under the purview of the NRDCL.

Presently, the company carries out sand extraction throughout the country to meet the demands of the public and the emerging construction industry. The sand is supplied directly from the quarries and depots at low prices as per the demand of the customers and the rates are approved by the NRPC.

The sand is also being supplied with transportation facilities in the high demand areas to keep the transportation cost to the minimum.

C. Stone/Boulders Quarrying and Supply

The NRDCL is also engaged in marketing of stone/boulders and has exclusive rights to operate stone quarries in FMUs, if required. From March 2008, the Corporation took over extraction and marketing activities of river stone nation-wide. Some of the boulders are exported across the border to generate revenue. Like sand, stone is supplied directly from the collection sites as per the demand of the customers at fixed rates approved by the NRPC.


The NRDCL has so far processed for 65 stone quarries but 36 were not found feasible. Out of the remaining 29 quarries, 13 have been cleared by Department of Geology and Mines (DGM) and are being processed for clearances with other stakeholders. The balance 16 quarries are pending pre-feasibility study by DGM. The main problem found in quarry approvals are the lengthy bureaucratic procedures and formalities during implementation.

d. Stone Chips Production and Supply

With directives from the Royal Government to establish stone crushing plants in priority areas identified by the government and to operate stone quarries to ensure the availability of quality construction materials, especially stone and aggregates, and to address the shortage of such materials in the market, NRDCL has established two crushing plants and is in the process of setting up another four crushing plants in strategic locations across the country.

Stone Crushing Plant at Bhur, Gelephu Stone Crushing Plant at Tingzam, Monggar

e. Reforestation Programs

It is the RGOB’s policy to maintain at least 60% of the total land areas under forest cover for all times to come. Therefore, NRDCL carries out reforestation activities within areas where timber has been harvested and also in blank and degraded areas within and outside FMUs. The Management also provides seedlings to the various agencies in order to promote forest cover as per the policy.


f. Forest Road Construction

Ever since starting logging operations in 1984, first as BLC, then FDCL and now as NRDCL, the company has been carrying out environment friendly forest road constructions to facilitate timber harvesting. The company has always given more emphasis in connecting remote villages that are located within the FMUs while constructing the forest roads. As a result, some of these forest roads pass through the remote villages, benefiting local communities in terms of economic growth and rural development. NRDCL also collaborates with concerned Dzongkhag authorities to combine forest roads with farm roads constructions, wherever possible, in order to save the overall costs for the nation.

In recent years, NRDCL has also started constructing roads for the purpose of sand and stone operations, wherever necessary.

g. Supply of Woodchips & Firewood

The company started supplying woodchips from May 2008 to meet the demand of ferro-alloy industries. Woodchips are supplied both from FMUs and other areas allotted by the Department of Forests and Park Services. Woodchips are converted mainly from forest residues and the work is outsourced to contractors through open tender. While the supply is managed and regulated by NRDCL, the price is fixed by the NRPC.

NRDCL also started the supply of firewood from 2004. The supply is made from forest


residues such as lops and tops after the extraction of prime timber. Therefore, supply of firewood from NRDCL is not demand based as we supply whatever is left behind after the extraction of prime timber.

h. Production & supply of briquettes

In order to reduce the increasing pressure on our natural forest resources for fuel wood as a source of energy (for heating and cooking), the NRDCL manufactures saw dust briquettes as a substitute for fuel wood and to better utilize waste wood, mainly sawdust from sawmills.


ii. DiRECTORS’ REPORT

On behalf of the Board of Directors, Natural Resources Development Corporation Limited (NRDCL), I am pleased to report the performance of the company for the period 1 January 2011 to 31 December 2011.

The NRDCL’s mandate is sustainable management and utilization of our country’s natural resources and, thereby, make the scarce domestic resources such as timber, river sand, boulders, coarse aggregates, etc. accessible, available and affordable to the general public and significantly contribute to construction industry.

The demand for timber has been increasing substantially due to fast growing capital city of Thimphu & developments in other municipalities, construction/renovation of Dzongs & Lhakhangs, rural constructions, etc. The volume of annual timber extraction from our forests has, however, remained more or less the same, limited to the Annual Allowable Cut (AAC) prescribed by the government (around 2.000 million cft/annum) in order to ensure sustainability and preservation of 60% forest cover for all times to come, which is also in keeping with the constitutional requirement. Furthermore, with the existing resources of NRDCL (viz. man power, expertise, machinery & equipment), it is found technically and commercially not viable to harvest timber from areas which are not only remote but also located in very rugged terrains. A need is felt by the company to procure new sets of robust heavy machinery & equipment suitable for efficient timber extraction in such challenging work environments.

In order to supplement domestic timber production, the NRDCL is seriously working on how it can play a major role in the import of good quality timber in the near future, especially to meet the demand of certain wood-based industries. In order to reduce and substitute timber use in the future, the NRDCL has been carrying out bamboo plantation and is looking at potential areas for large scale plantation.

The NRDCL has ensured that river/natural sand, the most basic building material, is made available throughout the year from its local quarries and stock yards at affordable prices for both private and public constructions. Following the Royal Government’s Executive Order of May 2010, the NRDCL has been also actively engaged in totally a new venture which was to find, carry out detailed field investigations and acquire suitable stone quarries to set up six (6) stone crushing units before the deadline of 30 June 2012 for local supply of good quality construction aggregates. Due to their continuous hard work and dedication, and against all odds arising from prevailing procedures, the NRDCL management has expressed confidence that all of its six (6) stone crushers will be in operation within the deadline of 30 June 2012 (provided clearances are obtained in time), making good quality aggregates available for construction in the


following six Dzongkhags: 1) Zhemgang (Homdur), 2) Sarpang (Bhur), 3) Mongar (Tingzam), 4) Samdrup Jongkhar (Golanti), 5) Pema Gatshel (Tshilingkhor) and 6)Trashi Yangtse (Kenchholing).

By all standards, the overall performance of the company for the year 2011 has been commendable as will be made evident in this report. However, it is to be noted that the NRDCL is a growing company with the basic mandate to fulfill very important development & social goals and objectives in the natural resources sector. Therefore, its efficiency, effectiveness and achievements have to be assessed based not on its financial performance or profitability but primarily on its contribution to development of natural resource and social objectives. As such, this very important aspect has been fully incorporated in the company’s Annual Compact 2012 with DHI.

1. Operational highlights

1.1. Timber, Woodchips, Firewood and Briquette

The production and disposal of timber, woodchips, firewood and briquette by NRDCL for the year 2011 vis-à-vis 2010 and 2009 are as given below:

Sl. No Particulars

Year

2011 2010 2009

Target Achievement

1 Timber production (cft) 2,004,500 1,943,995 1,828,660 1,876,201

2 Timber disposal (cft) 2,004,500 1,971,564 1,999,407 2,068,852

3 Rural timber supply (cft) - 213,690 248,115 180,326

4 Wood chips supply (M3) 14,610 20,517 16,641 21,539

5 Briquette production (Kg) 500,000 304,880 393,330 558,835

6 Briquette disposal (Kg) 500,000 306,015 529,915 470,795

7Firewood production & Supply (TL)

400 3,795 3,897 5,077

• Timber production in 2011 was 1.944 million cft. against the target of 2.004 million cft. The shortfall in production was due to unavailable operation sites.

• Disposal of timber was 1.972 million cft. against the target of 2.004 million cft.

• 0.214 million cft. of rural timber was supplied at subsidized rates to support rural construction, fire victims at Bumthang, earthquake victims at Haa, for resettlement at Pema Gatshel and new township at Bajo, foregoing substantial revenue of Nu. 6.112 million as a direct contribution to social objectives.

• Produced and marketed 20,516.99 M3 of woodchips against the target of 14,610 M3 in 2011, earning a revenue of Nu. 32.614 million.


• 304,880 kg sawdust briquettes were produced in 2011 against the target of 500,000 kg and 306,015 kg was disposed. The underachievement was due to the non-availability of sawdust in and around Thimphu, and transporting sawdust from Haa, Paro and Wangdue is found uneconomical.

• 3,795 truckloads of firewood were supplied against the target of 400 TL in 2011 as compared to 3,897 truckloads in 2010.

1.2. Sand & Stone Production and Supply

The production and disposal of sand, stone/boulders and stone aggregates in 2011 vis-à-vis 2010 and 2009 is as given below:

Volume in Truck Loads

Sl. No.

Particulars2011

2010 2009Target Achievement

1 Sand Production 55,850 57,375 57,619 43,865

2 Sand Disposal 55,850 62,700 46,719 40,180

3 Stone Production 24,000 31,045 31,237 17,354

4 Stone Disposal 24,000 30,890 28,646 17,329

5Stone Aggregate Production & Dis-posal

27,221 579 - -

• 57,375 TL of sand were extracted against the target of 55,850 TL in 2011 and 62,700 TL were disposed.

• Total revenue of Nu.56.941 million was earned from sale of sand in 2011 as compared to Nu. 49.353 million in 2010.

• 31,045 TL of stone/boulders were extracted against the target of 24,000 TL in 2011, out of which 30,890 TL were disposed.

• Total revenue of Nu.18.201 million was earned from sale of stone in 2011 as compared to Nu. 28.595 million in 2010. The decrease in the revenue in 2011 despite the increase in disposal as compared to 2010 was mainly due to the reduced cost of stone in 2011.

• Total revenue of Nu.2.289 million was earned from the sale of stone aggregates in 2011 against the target of Nu. 102.351 million.

1.3. Forest Road Construction, Plantation & Seedlings Production

Sl. No.

Particulars2011

2010 2009Target Achievement

1 Road construction (km) 30 28.885 23.215 19.76

2 Plantation (Ha.) 53 55.87 56.52 66.00

3 Seedlings production (No.) 111,000 120,370 160,824 208,175


• 28.885 km of road construction was completed against the target of 30.00 km at a cost of Nu. 24.051 million. Further, 80% of the balance 1.115 km has also been completed and the rest is expected to be completed in 2012.

• 55.87 ha. plantation was carried out in 2011 against the target of 53 ha. and 120,370 nos. of seedlings were produced against the target of 111,000 seedlings. A total of Nu. 4.217 million was spent towards reforestation expenses, i.e., creation and maintenance of plantations and seedlings.

2. Financial highlights

The highlights of financial performance of the Corporation for the year 2011 as compared to last two years are presented below:

(Nu in million)

Sl. No Particulars 2011 2010 2009

1 Share Capital 30.000 30.000 30.000

2 Reserves & Surplus 463.726 465.182 415.073

3 Net worth (1+2) 493.726 495.182 445.073

4 Borrowings - - -

5 Capital Employed (3+4) 493.726 495.182 445.073

6 Gross Block of Assets 568.769 504.220 484.096

7 Accumulated Depreciation 191.892 166.715 178.060

8 Net Block of Assets (6-7) 376.877 337.505 306.036

9 Working Capital 82.273 113.104 127.840

10 income from Sales 328.405 371.413 305.989

11 Other Income 20.626 17.576 15.065

12 Total income (10+11) 349.031 388.989 321.054

13 Expenses 275.911 251.250 225.216

14 Depreciation 38.498 27.492 28.379

15 Total Expenses (13+14) 314.409 278.742 253.595

16 Profit before Tax 30.594 103.553 59.241

17 Corporate Income Tax 9.795 30.525 18.087

18 Profit After Tax 20.799 73.028 41.154

19 Dividend 10.399 21.908 28.808

• Decrease in the Net Worth of the company from Nu. 495.182 million in 2010 to Nu. 493.726 million in 2011.

• Total income from sales has decreased from Nu. 371.413 million in 2010 to Nu. 328.405 million in 2011, viz. by Nu. 43.008 million. This was mainly because timber was disposed through the allotment system at the NRPC approved rates as compared to timber disposal through auction till October 2010.


• Increase in the total expenses from Nu. 278.742 million in 2010 to Nu. 314.409 million in 2011 (viz. an increase of Nu. 35.667 million), mainly because of: a) inflation and increased operation costs, b) increase in overhead costs as a result of 20% increase in pay and additional employees recruited for crushing plants, and c) increase in depreciation due to additional investments in fixed assets for crushing plants and machineries.

• Decrease in the Company’s net profit (Profit After Tax) from Nu. 73.028 million in 2010 to Nu. 20.799 million in 2011, viz. by Nu. 52.229 million. The reasons are highlighted below:

i. The timber was disposed through allotment system in 2011 as compared to auction system till 2010. The average auction price of timber was approximately Nu. 132.91/cft. in 2010 as compared to Nu.110.20/cft. in 2011, leading to a difference of approximately Nu.22.71/cft. and subsequently resulting in revenue loss of Nu. 44.785 million in 2011 (i.e., 1.972 cft. x Nu.22.71/cft. = Nu. 44.785 million).

ii. The actual volume of timber received in 2011 was less than the targeted volume due to non-approval of operational plans of some of the areas like Haa-east FMU, JJ Peak Working Scheme (WS), Zatola WS, Jowgay WS, etc. by DoFPS, from which about 178,582 cft. of timber was lost.

iii. The crushing plants could not be established as planned due to clearance problems. The revenue generated from stone aggregates is only Nu. 2.289 million as against the target of Nu. 102.351 million, thereby reducing the revenue by about Nu.100.062 million.

iv. There is substantial increase in operation and HR costs as well as huge depreciation due to investments in crushing plants and machineries.

3. Audit and Accounts

The Balance Sheet as of 31st December, 2011 and Profit and Loss Account for the year 2011 were duly audited by M/S S. Jaykishan & Associates, Chartered Accountants, Kolkata.

The Corporation has complied with most of the observations of the Auditors on the Corporation’s accounts of the previous year. As such, for the year 2011 the Auditors have not made any adverse observations on NRDCL Accounts, except for some suggestions and recommendations for further improvement.

The Notes to Accounts referred to in the Auditor’s Report are self explanatory and, therefore, does not call for any further comment on the observations under Section 71(1) (D) of The Companies Act of Kingdom of Bhutan 2000.


4. human Resource Development

NRDCL has 336 employees managing its operations in the seven Regional Offices, covering whole of the country. In line with the increasing activities and mandates, 44 employees were recruited, mainly for the stone crushing plants, during the year. Further, continuing to place utmost importance on the human resources development, Nu.3.784 million was spent in training 73 staff at various levels, both within and outside the country, including two long term studies.

The Organization Structure was reviewed and revised to include and reflect the expanding business of the company with additional mandates. The Human Resource Strategy was also developed as a guide for planning and developing a pool of highly specialized and efficient manpower towards achieving the organizational goals.

The Performance Management System, which was introduced in 2010 was fully implemented in 2011 and the bonus payout was also made based on the performance.

5. New initiatives carried out during 2011

5.1. Operational

a. Installed and operationalized 1 crushing plant of 100 TPH capacity at Tingzam & 5 units are under process at Bhur (Gelephu), Homdur (Zhemgang), Golanti (Daifam), Kencholing (Trashi Yangtse) and Tsilingkhor (Pema Gatsel). The purchase orders for two units have been issued. The installation of rest of the plants are expected to be completed by June 2012.

b. Identified over a dozen stone quarries, out of which one quarry at Homdur at Zhemgang has been finalized and the management is in the process of getting clearances for other quarries at Tshangkha (Monggar), Tsilingkhor (Pema Gatsel), Tshochasa (Tsirang), Sanagma (Thimphu), Gidakom (Thimphu) and Samkori at Lhamoizingkha (Dagana).

c. A study to explore bamboo as a substitute for timber (plantation, species, technology, and products) was completed.

d. To showcase the use of bamboo as an alternative to timber:

1. coordinated and facilitated the construction of the Bamboo Craft Bazaar in Thimphu, and

2. constructed a Bamboo Canopy at Punakha

e. Carried out thinning works in conifer forests in collaboration with DoFPS (MoAF) to improve forest stand and produce good quality timber to meet the market demand.


5.2. Corporate Governance

a. Developed and approved the Financial Manual and Procurement Manual for implementation from 2012.

b. Streamlined Store and Inventory Management Policy & Procedures and included it in the Financial Manual.

c. A study on the Cost Trend Analysis was completed and controllable cost heads identified and included in the Compact for 2012.

d. Carried out Training Needs Assessment and developed HR Strategy for both long term and short term trainings and recruitment plans.

e. Reviewed and revised the Organization Structure to adequately reflect the expansion in business with additional mandates and activities, and worked out the manpower requirements.

f. Resolved all the Audit observations for 2010.

g. Implemented the Performance Management System.

5.3. Customer Service

a. A Contact Center has been set up at the Corporate Office with one agent to improve customer services and attend to customer complaints/grievances more effectively.

b. Developed the Standard Operating Procedures and Customer grievance redressal mechanism.

6. Corporate Social Responsibility (CSR)

6.1. Rural timber subsidy and revenue forgone

The corporation has supplied timber (rural) at subsidized rates to general public in rural areas, foregoing substantial revenue. The subsidies provided during the last three years are given below.

YearTimber Supplied to rural

areas (cft)

Royalty forgone by Govt.

(Nu. in million)

Revenue forgone by NRDCL

(Nu in million)

2011 213,690.35 2.337 6.112

2010 248,114.77 2.805 8.672

2009 180,325.65 1.813 3.691


6.2. Construction and maintenance of forest roads

Many of the forest roads constructed by NRDCL in different regions are planned to benefit the local communities, apart from serving NRDCL’s purposes, thereby bringing good socio-economic impacts to the communities. Such roads are maintained by NRDCL even after completion of the operations. In 2011, about 28 km of road was constructed and approx. 347 km maintained.

6.3. Briquette production and marketing

Although purely a non-profit venture, the company manufactures sawdust briquette as a substitute for fuel wood in order to a) reduce the increasing pressure exerted on our forest resources by local demand for fuel wood (for heating & cooking) and b) to better utilize waste wood, mainly sawdust from sawmills.

Sl. No

Particulars2011

2010 2009Target

Achievement/Actual

1 Briquette production (Kg) 500,000 304,880 393,330 558,835

2 Briquette disposal (Kg) 500,000 306,015 529,915 470,795

3 Briquette Production cost (Nu. in million)

2.495 1.524 1.864 2.424

4 Revenue from sale of Briquette (Nu. in million)

1.750 1.048 1.812 1.607

6.4. Donations

In 2011, donations amounting to Nu. 0.401 million were made for various social, religious and welfare purposes.

6.5. Construction of Barrack and Toilet at Jague Menchu

NRDCL initiated and carried out the construction of barracks and toilets at Jague Menchu (hot spring) at Lumi Gewog, Paro, which is known for curing various diseases, for the benefit of the public at a cost of approx. Nu.0.500 million.

7. Environment Promotional Activities

In keeping with the constitutional requirement to maintain 60% of the areas under forest cover for all times to come and managing the natural resources on a sustainable basis, NRDCL has been investing in afforestation/reforestation activities. In 2011, Nu.4.217 million was spent towards such activities.

Further, in order to make the field operations environment-friendly, imported and expensive state-of-the-art machinery/equipment are employed and scientific harvesting


methods are used, thus causing minimum damage to the environment and giving due importance to the national environmental concerns.

8. Customer Satisfaction Survey

According to the findings of the Customer Satisfaction Survey, the Customer Satisfaction Index (CSI) of NRDCL is reported to be 3.45 on a scale of 5, which is a slight increase from 2010.

9. Future Plans and Activities

Besides harvesting and marketing of timber, sand & stone, the NRDCL will be taking up the following activities in the future:

(i) Working closely with DoFPS to increase the timber target/production to meet the demand.

(ii) Identifying more sand sites and stone quarries to meet the market demand.

(iii) Carry out a pre-feasibility study for setting up a bamboo treatment plant & set up a unit on pilot basis in 2012.

(iv) Carry out bamboo plantation in the sub-tropical/tropical regions to build the resource base for bamboo for use as an alternative to timber.

(v) Identify options for dredging of sand from rivers & set up a unit on pilot basis.

(vi) Start the import of timber on a trial basis.

(vii) Open up stone quarries in identified locations, if possible one quarry in each Dzongkhag to meet the growing demands in urban, semi-urban and rural areas.

(viii) Further develop and strengthen the Company’s human resource to meet its emerging challenges.


10. Remuneration to Directors

(a) Chief Executive Officer 2011 (Nu) 2010 (Nu.)

Salary 924,750 850,664 Provident Fund 101,232 85,434 Bonus 77,250 150,000 Gratuity (Provision) 77,250 75,000 Sitting Fees 72,000 64,000 Total 1,252,482 1,225,098

(b) Other Directors

Directors sitting fees 388,000 304,000

11. Acknowledgement

Concluding Directors’ Report to the Shareholder at the 5th Annual General Meeting (AGM) of your Company, I would like to express the deep appreciation and sincere gratitude of the NRDCL Board of Directors to the Royal Government, Druk Holding & Investments (DHI) - sole Shareholder, Department of Forests & Park Services (DoFPS), Department of Geology & Mines (DGM), National Environment Commission, Dzongkhags, local governments and communities, and all the other concerned agencies for their guidance, gracious support, feedback and encouragement which have been so valuable for directing the course of the Company.

Furthermore, on behalf of the Directors, I would also like to acknowledge the hard work and commendable performance of the management team and employees of NRDCL during the year 2011 and their continued dedication and commitment towards achieving the Company’s vision, goals and objectives. I am confident that the management and staff of NRDCL will continue to strive towards taking the company to greater heights.

Tashi Delek

For and on behalf of the Board.

(Phuntso Norbu)Chairman


Yet another fruitful year has come to an end. Bed-rocked in its mandates to supply natural resources like timber, sand and stone at affordable rates, the NRDCL has been striving hard to achieve this and leaving no stones unturned in its efforts. But there have been challenges. Nonetheless, I would like to underline that it is a difficult task though not impossible. This is embodied in the achievements and progress that NRDCL made in 2011 in the face of challenges and constraints.

Firstly, we should remember that NRDCL shoulders a unique responsibility which makes the company special. While profit is the bottom-line in most or all companies, it takes a backseat in the case of NRDCL because more emphasis is placed on its development and social responsibilities and service delivery rather than its financial performance.

I reiterate that one of main objectives of NRDCL is to make natural resources “affordable, accessible and available for judicious use in the best interests of the nation and people”. As the major activities and achievements have been highlighted in the Directors’ Report, I would like to present some of the challenges that NRDCL is confronted with.

One of the foremost challenges faced is meeting the demand for timber. Shortage of timber has been highlighted as one of the major constraints by many, both in the private sector and the Government, involved in construction. With the boom in the construction industry and increase in the Government projects, the demand for timber has been rising steadily over the years whereas the supply has remained more or less consistent. On the other hand, it would not be possible to increase the timber supply simply to meet all the demands as it would be going against the Constitutional mandate of maintaining 60% forest cover at all times. Looking at the pace of development that the country is undergoing, the problem of timber shortage will never be resolved unless we find ways and means either through import or use of timber substitutes.

Nonetheless, we at NRDCL are doing our best to supply whatever timber is available and also looking for alternatives like import of timber, use of bamboo and others. Towards this end, we are carrying out a pre-feasibility study for setting up a bamboo treatment plant and would be setting up a unit on pilot basis this year (i.e., 2012). In addition, we are carrying out bamboo plantations to build the resource base. Further, timber import would also be started from 2012.

We are confident that this will definitely ease the problem that exists today. Additionally, it is anticipated that shortage of sand would be faced in the near future. Currently, sand is supplied mainly from Wangdue to high demand areas like Thimphu, Paro, Punakha, etc. and with the commissioning of the Punatsangchu Hydropower Project, the present quarries will be submerged by the dams. As an alternative, we are identifying sand quarries in other areas and also planning to set up a sand dredging unit in 2012.

iii. ChiEF ExECuTivE OFFiCER’S REPORT


On the stone front, NRDCL is faced with a lot of challenges and obstacles, mostly external, which renders us helpless despite our relentless efforts. The management has been doing everything possible to set up crushing plants and operationalize stone quarries including identification of areas and quarries, purchase of stone crushing plants and supporting equipment, recruitment of the required manpower, etc. However, we have not been able to achieve the desired progress or results as the procedures and processes involved in acquiring quarries and crusher locations are very lengthy and cumbersome. There are a chain of institutions, including the concerned local governments and the general public, involved in the clearance and awarding processes and without whose consent we cannot even begin our tasks.

The figure speaks for itself. In the last three years, NRDCL has identified and applied for 65 stone quarries throughout the country to the Department of Geology and Mines, out of which, only 13 sites have been cleared for further processing with other agencies/stakeholders. Further, out of the 13 sites, only one has been approved/cleared till date.

Despite all these challenges, we have been able to establish two crushing plants (one at Tingzam in Mongar and another at Bhur in Gelephu) and another four would be set up by mid 2012.

However, as mentioned before NRDCL has not failed to deliver notwithstanding the challenges and we are committed to continue doing so. This has been possible due to the hard work, untiring efforts and commitment of the NRDCL staff and management and the guidance of our Chairman and the Board of Directors. We are confident that NRDCL will continue to receive the same support.

I would also like to take this opportunity to express my sincere gratitude to the Chairman, the Board of Directors, Druk Holding and Investments (DHI), Ministry of Agriculture and Forests (MoAF), Department of Geology and Mines, Department of Forests and Park Services (DoFPS), National Environment Commission (NEC), National Land Commission Secretariat (NLCS), Dzongkhags, local governments and all other agencies for their continued support, co-operation and guidance in making the financial year 2011 a great success.

I also convey my deepest appreciation to all our valued customers and stakeholders for their continued co-operation and support.

Lastly, I would like to place on record our commitment and dedication to fulfill the very objectives with which NRDCL was created and deliver our services as best as we can. We also look forward to yet another successful year ahead.

Tashi Delek

(Gyem Tshering)ChiEF ExECuTivE OFFiCER


iv. AuDiTORS’ REPORT


Addresses & Telephone Numbers of NRDCL Offices

Website: www.nrdcl.bt

Corporate Head OfficePhendey Lam, Thimphu : BhutanPost Box No. 192Tel. Nos.Chief Executive Officer: +975-2-322615 EPABX: +975-2-323834/323868/328959/ 77190073Fax No. +975-2-325585E-mail: [email protected]

Sha Regional Office (Regional Manager)Samthang, Wangdue : BhutanPost Box. No.1243Tel. No. +975-2-481272/481537Fax No. +975-2-481247E-mail: [email protected]

Rinpung Regional Office (Regional Manager)Paro : BhutanTel. No. +975-8-271519Fax No. +975-8-271479E-mail: [email protected]

Zhonggar Regional Office (Regional Manager)Monggar : BhutanTel. No. +975-4-641160/641165Fax No. +975-4-641210E-mail: [email protected]

Wang Regional Office (Regional Manager)Phendey LamThimphu : BhutanPost Box No.192Tel. No. +975-2-323469EPABX: +975-2-323834/323868/

328959/77190073 Fax No. +975-2-325585E-mail: [email protected]

Jakar Regional Office (Regional Manager)Bumthang : BhutanPost Box No.122Tel. No. +975-3-631470Fax No. +975-3-631471E-mail: [email protected]

Phuentsholing Regional Office (Regional Manager)Phuentsholing : BhutanTel. No. +975-5-252154/254765Fax No. +975-5-253094E-mail: [email protected]

Zhemgang Regional Office (Regional Manager)Zhemgang : BhutanPost Box. No.395Tel. No. +975-3-741159/741176Fax No. +975-3-741177E-mail: [email protected]

NATURAL RESOURCES DEVELOPMENT CORPORATION Ltd.


ANNUAL REPORT 2011

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