Financial Daily from THE HINDU group of publications
Saturday, Jun 15, 2002
Jay Shree Tea not to restart SSP production
KOLKATA, June 14
JAY SHREE Tea and Industries Ltd, a B.K. Birla group company, will not start production of single super phosphate (SSP) at its fertiliser plant located in Pataudi near Gurgaon in Haryana, in an effort to reduce its losses.
According to Mr R.K. Ganeriwala, Executive President and Secretary, production was stopped from April 3 last year. "Though more than a year has passed, the market conditions have not improved. So, there is no immediate possibility restarting the production of SSP in that unit," Mr Ganeriwala told Business Line.
However, the unit continued with the production of sulphuric acid. This is the third fertiliser unit of the company. The first two units are located at Kardah in West Bengal. The fertiliser business contributes about 22 per cent of the total turnover. The units in Kardah continue to produce SSP and sulphuric acid.
"The Haryana unit suffered heavy losses last year due to unremunerative prices of SSP. It was therefore decided to suspend the production of SSP and minimise the losses," he said.
The directors' report in the company's annual report for 2001-02 stated that the management tried to cut the unit cost of production by reducing power expenses. It installed a power generating steam turbine. However, due to uneconomical prices, the company could get the desired results.
Mr Ganeriwala said that the cost of raw materials and other overhead expenses were rising, but it could not be matched by a similar increase in the prices of SSP.
"Further, Government was gradually reducing the rebate on the sale of SSP. In the last Budget, the rebate had been brought down to Rs 650 per tonne from Rs 700 per tonne. The reduction in rebate could not be passed on to the consumers because of subdued market," the report stated.
For the year ended March 31, 2002, the company registered a total income of Rs 155.18 crore as against Rs 170.69 crore in the previous year. Net loss after taxation increased to Rs 2.13 crore against Rs 1.56 crore. The company recommended a dividend of 15 per cent as compared to 30 per cent in the previous year.
However, the company's accounts were criticised by its auditors Singhi & Co. They alleged that the company had understated its losses by Rs 55.14 lakh.
In the auditor's note to the annual report for 2001-02, they stated that Jay Shree Tea did not provide liability for accruing leave as ascertained actuarially on March 31, 2002.
"The impact of such a provision is Rs 79.01 lakh and its impact on loss for the year is higher by Rs 1.09 lakh. The company has also not provided for decline in the value of investments," the auditors stated.
On the other hand, the company has not recognised the assets and liabilities of its wholly-owned subsidiary, Shiva's Group Ltd, which was being merged into the company with effect from April 1, 2001. During 2001-02, the subsidiary had registered a loss of Rs 56.23 lakh.
The effective increase in the losses due to these two reasons would be Rs 55.14 lakh. If these changes were made, the auditors stated, the reserves and surplus of the company would have been Rs 11,834.69 lakh as against the reported figure of Rs 11,971.85 lakh. Similarly current assets would have been Rs 10,384.45 lakh against the reported figure of Rs 9,342.20 lakh.
Mr Ganeriwala said these were routine comments from the auditor. "This a regular and usual note from the auditor. One will always find similar notes in other annual reports. Moreover, it was not possible of us to prepare a combined report of Jay Shree Tea and Shiva's Group Ltd," he said.
According to him, the Calcutta High Court order regarding the merger came after March 31, 2002, though the merger was effective from April 1, 2001. The results of Jay Shree Tea were prepared as on March 31, 2002.
"Moreover, we made a notional entry of Rs 56 lakh as interest paid to holding company in the accounts of Shiva's group. If the two companies were merged then this entry would not have been made and Shiva's group would not have registered a loss. This would have nullified the claims of the auditor," he said.
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