Financial Daily from THE HINDU group of publications
Friday, Oct 01, 2004
Workers resent delay in restructuring of FACT
Kochi , Sept. 30
OVER 4,200 workers and officials in the central public sector undertaking Fertilisers and Chemicals Travancore Ltd (FACT) at Udyogamandal appear to be frustrated over the delay in restructuring the company.
Despite the visit of the Union Ministers to the company in recent months, nothing fruitful has emanated so far from the Government, they alleged. The restructuring proposal has been pending for about two years now.
The price of urea has shot up to $270 a tonne now from $140 some time ago and yet the urea plants of the company remain closed. "We are still facing an uncertain future because of the delay in taking a final decision by the Government," a senior official said.
When contacted, Mr S. Balan, Chairman and Managing Director, Rashtriya Chemicals and Fertilisers (RCF), who is holding additional charge of CMD, FACT, said that the restructuring proposal of the company was still pending with the Union Finance Ministry.
It has to be cleared by the Ministry and the Cabinet Committee on Economic Affairs, he said. "If everything goes well it is expected to be cleared by the year-end," he said.
The unit has been operating in full capacity now and fertilisers produced is sold out, he said. The price of caprolactum has also gone up. However, the increase in the inputs cost has reduced the margin, he said. The working capital problem is manageable at present, Mr Balan added.
Company officials here said that in the restructuring proposal, the Union Government had been requested to write off the outstanding loan of Rs 518.2 crore (ammonia plant Rs 378.2 crore, plus Central plan loan of Rs 140 crore) and hitherto accumulated interest burden.
The main argument put forward is that FACT started making losses only after the setting up of the new ammonia plant in 1994 at a total cost of Rs 617 crore with OECF assistance. This was set up following the closure of its ammonia tank at the Wellington Island on the orders of the Kerala High Court on a PIL filed by Law Society of India and others.
The plant was commissioned in 1998 and found to be economically unviable and started making heavy losses. Following the setting up of this plant, the expenditure of the company increased from Rs 1,101 crore in 1997-98 to 1,137 crore the next year and to Rs 1,728 crore in 2000-01.
In 2002, after the closure of the urea plant the expenditure dropped to 1,287, then the turnover of the company fell from Rs 1,772 crore to Rs1,393 crore. Thus, the escalating expenditure reflected the adverse effects of the new plant, which had to be set up following the closure of the tank, the officials argued.
The Supreme Court, on an appeal filed by the company, had by its order on February 25, disposed of the appeal saying that the tank can continue in service in the present condition subject to certain measures being taken by the company as suggested in the report of the Engineers India Ltd. The Apex court had entrusted the latter to study the structural integrity of the tank and its operations.
They said that the restructuring alone would not be sufficient for the revival of the company. The State Government will have to reduce sales tax and power tariff, withdraw entry tax of 29 per cent and allot mini hydel projects for FACT.
The reasons for the losses, he said, were the changed fertiliser policy, energy, transportation costs, unwieldy manpower strength and loss due to ammonium sulphate and inadequate efforts towards expansion and diversification.
Stories in this Section
The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | Business Line | Sportstar | Frontline | The Hindu eBooks | The Hindu Images | Home |
Copyright © 2004, The
Hindu Business Line. Republication or redissemination of the contents of
this screen are expressly prohibited without the written consent of
The Hindu Business Line