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Saturday, Jun 08, 2002

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Will Traco emerge from the blues?

G.K. Nair

KOCHI, June 7

FERGUSONS, which was appointed by the State Government to study the problems and restructuring of the public sector, Traco Cables Ltd, has presented its report to the Government.

The report would be discussed by the board of directors of the company at a meeting expected to be held next week, Mr N.R. Subramanian, Managing Director, told Business Line.

The poor performance of the company in recent years and change in the market conditions had necessitated such a study, he added.

According to him, the turnover dropped significantly to Rs 36 crore last fiscal from Rs 89.5 crore in 2000-01.

"As a result, the company incurred a substantial cash loss in 2001-02. In fact, it had posted a net profit of Rs 9.16 crore and Rs 4.63 crore in 1999-00 and 2000-01 respectively," he said.

The basic problem of the company was that it had to depend on only one customer, BSNL.

While BSNL's requirement was around 230 lakh cable km (CKM), the installed capacity in the country was to the tune of 1,230 lakh CKM.

Traco Cables has a total installed capacity of 17.5 lakh CKM of jelly-filled cables at its Tiruvalla unit in Pathanamthitta district.

During the last fiscal, it received an order for 8.6 lakh CKM. But to break even, the company needs an order of 15 lakh CKM, according to the Managing Director.

On the other hand, by the time the order was received, at least 5-6 months of the fiscal would have elapsed.

Being a Government concern, it could not manufacture the cables on the anticipation that it would get the orders for the assumed quantity.

A majority of the manufacturers are in the private sector and Traco has to compete with them.

According to Mr Subramanian, there was undercutting in the prices which the PSU could not engage in.

"At the same time, the unit rate has not been improved in recent years," he said.

The cost of production is higher because of various factors such as transportation cost on raw materials, high labour cost, etc. On the other hand, low demand has restricted the capacity utilisation of the unit.

Meanwhile, the company's unit at nearby Irumpanam, which was set up to manufacture all aluminium alloy conductors for KSEB, has not been getting any orders now.

It also has to depend exclusively on KSEB. Even an order from the electricity board received long back worth Rs 52 crore is yet to be finalised.

In fact, there are three such units in the State of which two downed shutters long back. The only surviving one is the Traco unit, the Managing Director said. The high cost of production has made its products uncompetitive in the national market.

The raw materials for manufacturing jelly-filled cables come from as far as Gujarat, involving high transportation and inventory costs. Added to this is the overstaffing, which effects a substantial outgo towards wages/ salaries.

Traco has around 800 workers. Units with similar capacity elsewhere have much fewer workers.

The outgo towards wages is estimated at Rs 7.5 crore per annum, which is comparatively much higher for a company that has been posting an annual turnover of Rs 35-90 crore, he said.

On the other hand, with the shift towards optical fibre cables in the telecom sector, the demand for jelly-filled cables is bound to fall.

But the chances of Traco shifting to manufacture of optical fibre cables are also remote, as it is too late to embark on such a venture, he added.

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