The Hindu Business Line : MFL holds Govt responsible for losses

To sick
"The company became sick during 2003-04, but BIFR did not register the company as sick because we were hopeful of relief through changes in policy."
In 2006-07, the losses would mount by another Rs 100 crore.

Chennai , Sept. 21

The management and the foreign promoters of the public sector Madras Fertilizers Ltd have held the Union Government's policies responsible for the losses suffered by the company.

At the annual general meeting here on Thursday, the representatives of the foreign promoter, Iran's Naftiran Intertrade Co Ltd — which has a 25 per cent stake — declined to infuse funds, as the fertiliser pricing policy of the Government was adverse to the company.

Investments

Mr Mahmood Vaezi, a representative of Naftiran on MFL's board, responding to a shareholder's question, said: "We are concerned about the company's position... Unfortunately we have to obey the policy of the Government. The policy of Government is subsidy-based. We cannot do more. Ten years back, we invested with a hope. But in this situation, (we) are not ready to invest, not ready to infuse funds."

Hostile policy

The MFL Chairman and Managing Director, Mr Sukumar N. Oommen, said the company's performance and efficiency were optimal, but the fertiliser pricing policy was `hostile' to the company.

The situation was beyond the company's control and he urged the promoters - the Union Government holds 59.5 per cent stake and Naftiran 25.77 per cent - to take immediate action.

Mr Oommen said the "criticality is real (the company) needs immediate infusion of funds as early as next week."

Sick unit

As of March 2006, the accumulated losses of the company were at Rs 398.92 crore, he said. The company is to be brought under the purview of the BIFR under the Sick Industrial Companies Act. (According to sources, the losses are Rs 455 crore as of August.)

According to company officials, MFL's board on Thursday resolved to refer the company to the BIFR.

Mr Oommen said that the losses of the company are largely due to the changes in the pricing policy of urea and complex fertilisers. Though the company was efficient in its operations, the new pricing policy introduced in April 2004 under the group pricing scheme was `hostile.'

Urea subsidy

Under the new formula, subsidy for urea dropped to Rs 12,000 on April 1, 2004, from Rs 16,000. The pricing did not take into account the Rs 700 crore investments for revamping the unit and the interest and depreciation of the new machinery.

But the Government has not acted on the recommendations of Government-appointed bodies to remedy the situation.

The Tariff Commission, appointed by the Government, had recommended compensation for the cost of urea used in complex fertilisers. But the recommendation was neither accepted nor rejected.

In March 2005, the Board for Restructuring of Public Sector Enterprises had recommended correcting the anomalies in the pricing policies. The recommendations were considered by an inter-Ministerial committee of secretaries a year later but did not support the recommendations.

"All our hopes of revival are now in jeopardy," Mr Oommen said.

The company will continue to make losses but produce because of the obligation to farmers. In 2006-07, in the existing policy environment, the losses would mount by another Rs 100 crore.

There had been an effort to merge MFL with other public sector or cooperative units. But National Fertilisers Ltd, Gujarat State Fertilisers and Chemicals Ltd and Krishak Bharati Cooperative Ltd, which evinced interest initially have not responded.

Mr R. Kuchelan, a shareholder, and President, MFL Staff Union, sought clarification on the steps being taken to revive the company. While the Government-appointed committees have recommended steps to revive the company another arm of the Government was keeping quiet. Over the last two years "by gimmicks in accounting" the reference to the BIFR had been put off.

More Stories on : Fertilisers | Sick Units | Agricultural Policy

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