The Hindu Business Line : Traco Cables proposes to diversify

DESPITE drastic drop in demand for jelly-filled cables from BSNL, the state-owned Traco Cables Ltd, which has been incurring losses during the past two years, has got orders worth Rs 20 crore that might put the company back on the revival path.

Following the technological changes that are taking place in the telecom sector there has been a sharp fall in the demand for jelly-filled cables, which is being replaced by optical fibre cables. And the situation has been aggravated further by the entry of WLL and mobile phones. This has resulted in a sharp fall of 60 to 70 per cent in demand for jelly-filled cables, Mr P.M. George, Managing Director, Traco Cables, told Business Line.

All the 46 manufacturing units in the country are facing the same problem, he said. The only buyers are the public sector telecom companies, which are now switching over to other modes reducing the use of the cables manufactured by Traco. Consequently, there is stiff competition leading to undercutting with the result the price had dropped to less than the raw material cost, he pointed out. He said the company, which was in the red earlier was put back on the rail after liquidating its high cost loans amounting to Rs 48 crore. It was able to make a net profit of Rs 9 crore in 1999-00 and Rs 4.5 crore in 2000-01. However, the situation has changed thereafter and the company has started making losses for want of enough orders, he said. During the last fiscal accumulated losses stood at Rs 8.79 crore and it is estimated to touch Rs 17 crore by March 31, 2004, he said. Its current loan liability amounting to Rs 12 crore is to Kerala Industrial Revitalisation Fund, he said.

Given the downward trend in the demand for jelly-filled cable the company is planning to venture into some new business using the infrastructure available at its manufacturing unit at Thiruvalla in Pathanamthitta district, Kerala, at a cost of Rs 31 crore.

A major private consultant firm was engaged earlier to study the possibility of diversification, which had submitted a report to the State Government. As the implementation of its recommendations involved heavy investments, the government had entrusted the task to Enterprises Reform Committee (ERC) constituted by it, which is expected to submit its report in a month, he said.

According to Mr George, "the future is not bright for the cable manufacturing sector" as the potential for increase in the demand for jelly-filled cables in the future is less. To run the company's 15 lakh cable km (CKM) unit viably there should have to be an annual order of 12 lakh ckm, he said.

Traco's aluminium steel reinforced bare conductor manufacturing unit at nearby Irimpanam has an order worth Rs 12 crore from the State electricity board and it is under execution, he added.