• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

G.K. Nair

Kochi , Oct. 16

CONTRARY to expectations, the Union Government has taken a lukewarm response to the revival proposal of the public sector Fertilisers and Chemicals Travancore Ltd (FACT) at nearby Udyogamandal.

A highly placed official of the company told Business Line that the Cabinet Committee on Economic Affairs (CCEA) has waived the interest on loans amounting to Rs 80 crore for 2002-03, while granting a one-year moratorium on payment of interest for 2003-04.

From 2004-05, the company is allowed to repay the loan along with interest at 7 per cent instead of the existing rate of about 14 per cent, which would come to around Rs 580 crore in ten years. It would provide a relief of Rs 88 crore, he said.

The decision on allocation of funds for implementing the VRS would be taken after discussions between the Ministries of Finance and Fertiliser, he said. The Government's decision "really does not help the company". If the VRS proposal were accepted, the company could at least try to ensure a cash profit.

The company's restructuring proposal to the Centre, which was not accepted by the CCEA, sought writing off of outstanding loan of Rs 497 crore (ammonia plant Rs 378 crore plus Rs 110 crore) and hitherto accumulated interest burden; and a VRS package to reduce employee strength to 3,000 from around 5,000 at present.

VRS implementation, he said, would eliminate present cash loss, as there could be a saving of Rs 75 crore. However, the cost of VRS would come to around Rs 60 crore, which has to be funded by the Centre. A positive decision on this issue is expected, he said.

However, "the potential to become sick will remain", he pointed out. But, he said the net-worth of the company is not negative at present and the question, therefore, of referring it to BIFR would come up only on such an eventuality.

Meanwhile, the State Co-operative Bank President, Mr K.R. Aravindakshan, told Business Line that the co-operative sector in the State had already prepared a proposal for reviving the company.

"We are ready to take over the FACT on the similar terms and conditions of the disinvestment ministry framed for the private sector company". But, the Union Government would have to write off the loan given to FACT for setting up of the new ammonia plant as it was necessitated in public interest and not on the demand of the company, he argued.

The Chief Minister would discuss this issue when he calls on the Prime Minister on Friday, he said. The State Government had sought three months time for preparing a project proposal for taking over the company in the multi-State co-operative sector, besides withholding disinvestment of the company till that time.

The Union Government is yet to respond to this request and hence the project proposal could not be sent, he said.

Centre yet to respond: Minister

THIRUVANANTHAPURAM: The Centre is yet to respond to the State Government's proposal for bringing FACT within the co-operative fold, according to Mr M.V. Raghavan, State Minister for Co-operation.

He said here on Thursday that the State Government had approached the Union Disinvestment Minister, Mr Arun Shourie, for treating FACT, which had been marked for disinvestment, as a "special case". This was because the State was not in a position to compete with private bidders for the takeover of the company, he added.

The Chief Minister, Mr A.K. Antony, has also written to the Prime Minister in this regard, the Minister said. He made it clear that the State Government had never said it was prepared for open bidding with private players for the takeover of the company through an inter-State co-operative consortium. Instead, the State wanted FACT to be considered as a special case and it is now left to Centre to take a policy decision on the matter, he added.

Article E-Mail :: Comment :: Syndication

Stories in this Section
L&T, M&M win defence contracts

Copyright © 2003, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line