Financial Daily from THE HINDU group of publications
Tuesday, Apr 19, 2005
FACT revival under RCF management likely to be okayed
Kochi , April 18
THE Central Board of Reconstruction for Public Sector Enterprises (BRPSE) is likely to consider positively the package submitted by the Rashtriya Chemicals and Fertilisers (RCF) for reviving the Central public sector undertaking, Fertilisers and Chemicals Travancore Limited (FACT) at Udyogamandal near here.
The BRPSE is expected to recommend the rehabilitation package, initiated by the Union Fertiliser Ministry, to the Cabinet Committee on Economic Affairs (CCEA), Mr K. Chandran Pillai, CPI (M) leader and Rajya Sabha Member, told Business Line on Monday. However, he said, while accepting the proposal it might recommend "the future running of the FACT with a better management team."
The basic requirement for reviving the company is to convert the Central plan loan to equity, facilitating supply of raw materials at affordable prices and making available the required working capital, he said.
According to him the management responsibility would be entrusted to RCF for a limited period of two to three years under a contract between the two companies. During this period the RCF would be paid a fixed fee of one per cent of the turnover of the FACT per annum and this amount would be remitted in 12 equal monthly instalments.
The RCF has to help the company to make a turnaround within the stipulated period and hand over the management to the FACT management team, he said.
Mr Pillai said that the trade unions had neither accepted nor negated the proposal.
Meanwhile, some of the retired CEOs of the FACT expressed unhappiness over the proposal to hand over the management of the company to the RCF, which, they claimed, came into existence long after with the technical support of the former.
They said that the premier fertiliser company still has got well experienced management/technical experts who could extricate the unit from the red if the rehabilitation package submitted by the company a couple of years ago were accepted and implemented.
The basic problem of the unit is the high raw material (naphtha) cost and the debt burden that befell on it following the setting up of the ammonia plant with huge borrowed money at a wrong time.
The RCF is making profits because it is running its large capacity plants with the low cost gas as the raw material.
FACT has to dole out around Rs 700 crore towards cost of naphtha per annum while gas is available at almost one-third of this price, they said.
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