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G.K. Nair

Kochi , Oct 15

IF the Centre does not implement a revival package of Fertilisers and Chemicals Travancore Ltd (FACT) or if the company is not converted into a multi state cooperative society before the company's annual general meeting scheduled for December 18, it would have to be referred to the Board for Industrial and Financial Reconstruction (BIFR).

In the normal course the AGM was to be held in September and it has been postponed to December with the hope that a decision would be available before that on the management's restructuring /revival proposal, a senior company source told Business Line.The management had submitted a viable proposal to the Chief Minister recently for taking it up with the Centre. Besides, the company had put forward a restructuring scheme to the Centre, which has been receiving its favourable consideration.

Meanwhile, the trade unions and the state cooperative bank had taken the initiative to take over the company in the cooperative sector and operate it on the lines of IFFCO and KRIBHCO. However, this group has yet to submit a project proposal as it has been waiting for a response from the Centre on the group's request for three months time for doing so.

"If they were serious about it the cooperative movement should have prepared the project proposal and taken it to the Centre without wasting time on waiting for their response," the official pointed out.

On the other hand, the State Government should have taken the project proposal of the management to the Centre expeditiously. Even the Chief Minister should have taken it up directly with the Prime Minister or through the Opposition leader as the existence and well being of the FACT was inevitable for the survival of other industrial sectors in the State, he pointed out.

"If the FACT collapses the industrial scenario in the State will come to a grinding halt," he said. For instance, the pioneer fertiliser company absorbs good chunk of the products of public sector Travancore Cochin Chemicals Ltd (TCC). Similarly, there are other suppliers, transporters, contractors, all of whom will be trouble, he said. Therefore, its revival is inevitable in the interest of the State's economy.

According to unaudited accounts the company with a capital base of Rs 354.77 crore, has an accumulated loss of about Rs 285 crore. The loss during the current fiscal is estimated to touch Rs 150 crore. Thus, the accumulated loss is more than half of the paid up capital, the source said.

However, Mr Balasubramanian, Chairman and Managing Director, FACT, told Business Line that if the revival package proposed by the management is accepted and implemented, the company would make a turn around and achieve an annual net profit of Rs 112 crore.

The present crisis emanated from a drop in sales of fertilisers, severe glut in caprolactum market, and unprecedented increase in the cost of all input raw materials and utilities. The present cash loss comes to Rs 66 crore. The annual net loss of current operations of Rs 200 crore included impact of increased taxation by the State Government amounting to Rs 60 crore, doling out of interest, capital instalment return to the Centre of loan for ammonia plant and depreciation of Rs 140 crore per annum, apart from infrastructural bottlenecks to economically source costly raw materials.

The company had submitted a restructuring proposal to the Centre seeking writing of outstanding loan of Rs 497 crore (ammonia plant Rs 378 crore plus Rs 110 crore) and hitherto accumulated interest burden; and a voluntary retirement scheme (VRS) package to reduce employee strength to 3,000 from around 5,000 at present.

According to the CMD, the VRS implementation would eliminate present cash loss, as there could be a saving of Rs 75 crore. However, the cost of VRS would come to Rs 100 crore, which would have to be funded by the Centre as part of restructuring.

Writing off of pending loan amount of Rs 497 crore and the due interest of Rs 70 crore would result in an annual saving of Rs 140 crore as interest and depreciation and it would improve net-worth, he said.

Such a step would help in breakeven operations. Support from the State Government by way of abolition of entry tax, reduction in power tariff and lease rental would help the company make an annual saving of Rs 63.5 crore.

These measures along with modernisation would put the company back on the profit track in two years, he claimed.

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