Financial Daily from THE HINDU group of publications
Sunday, May 12, 2002
Tyre Corpn confident of breaking even
EVEN as the state-owned Tyre Corporation of India Ltd (TCIL) is uncertain about its future corporate identity, the company's acting Chairman, Mr Raji Philip, is confident that TCIL may not have any problem of achieving a break-even once the production reaches at least 36,000 pieces of tyres per month as against the current production of 24,000.
TCIL, a wholly-owned Central public sector enterprise, was incorporated in 1984 to take over the responsibility of running two nationalised companies namely Incheck Tyres Ltd and National Rubber Manufacturing Ltd. Subsequently, its tyre manufacturing unit at Kakinara in West Bengal was modernised enabling the new unit to begin commercial production starting from April, 1994.
But, due to acute shortage of working capital, commercial operation and a significant utilisation of the installed up-to-date capacity for the production of quality products could not be sustained.
The corporation had to stop production under its own brand name. Also, being unable to finance the working capital, it took recourse to the conversion of other companies' raw materials into finished tyres under other reputed brand names.
Elaborating on TCIL's production arrangements during the past several years, Mr Philip told Business Line that the output had so far been of excellent quality and the user companies had shown great interest in continuing and enlarging these arrangements. Encouraged by the consumers' satisfaction, the TCIL-management has decided to augment production under the existing conversion scheme from 24,000 pieces of tyres to 40,000 in phases.
He said that the management had recently introduced the three eight-hour shifts for a day to be continued uninterrupted for 365 days in a year so that the production target of 40,000 pieces and above per month could be achieved during the ongoing "holding operation'' till a revival scheme is announced by the Board for Industrial and Financial Reconstruction (BIFR).
Incidentally, TCIL was referred to BIFR in 1988 due to financial burden of the sustained unproductive assets pleading for a revival scheme for the ailing tyre company which is the only tyre manufacturing outfit in the country under the control of the government.
BIFR had initially asked IDBI to prepare a revival scheme for TCIL, but this had now been entrusted to Allahabad Bank. As an operating agency, Allahabad Bank is expected to submit a revival scheme within a month.
It is indicated that TCIL is currently doing conversion job for Apollo Tyre, Ceat and J.K. Tyres. Each company has committed to produce at least 10,000 pieces of tyres per month utilising the corporation's installed capacity.
TCIL produces about 2,000 pieces per month of "unbranded'' tyres for the state transport undertakings. It supplies tyres to the West Bengal and Uttar Pradesh transport corporations, although the sales realisation is poor.
Mr Philip said the revival of TCIL would depend on how Allahabad Bank recommended measures to liquidate the corporation's accumulated loss of about Rs 590 crore, out of which a substantial amount accounted for interest liability.
The acting chairman, who is also the full-time Chairman of the State-owned Hindustan Paper Corporation, is of the view that TCIL should have its own brand. Capacity utilisation with the help of conversion of outsider's raw materials could not help the corporation grow independently in the long run. What was more preferable was that TCIL should ultimately have an "alliance'' with a major international tyre company with a strong brand, he suggested.
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