Financial Daily from THE HINDU group of publications
Thursday, Jun 10, 2004
Financial Daily from THE HINDU group of publications Thursday, Jun 10, 2004 |
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Corporate
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Sick Units Paswan considering FACT recast plan, 'decision soon' G.K. Nair
Kochi , June 9 RESTRUCTURING of the ailing Central public sector Fertilisers and Chemicals, Travancore, Ltd (FACT), at nearby Udyogamandal, is likely soon as the proposal is being considered favourably by the Union Fertiliser Ministry. "It is in the advanced stage in the Ministry and would be sent to the Union Cabinet soon," Mr K Chandran Pillai, MP (CPI-M), who has been pursuing the issue with the Minister of State for Fertilisers, told Business Line from Delhi on Tuesday. He said the Minister, Mr Rehman Khan, would be visiting the fertiliser plant on June 16 after holding discussions with the Chief Minister at Thiruvananthapuram on June 15. However, Mr Pillai said the proposal should get the ratification of the Ministry of Finance and the Cabinet Committee on Economic Affairs (CCEA). The proposal sought writing off outstanding loan of Rs 518.2 crore (ammonia plant Rs 378.2 crore plus central plan loan of Rs 140 crore) and accumulated interest burden. The main argument put forward for writing off is that the FACT had started making losses only after the setting up of the new ammonia plant in 1994 at a cost of Rs 617 crore with OECF assistance, following the closure of its ammonia tank at the Wellington Island on the orders of the Kerala High Court on a PIL filed by Law Society of India and others. The plant was commissioned in 1998 and found to be economically unviable since it started commercial production. It is evident from the fact that the company, which had made a net profit of Rs 54 crore in 1997-98, had incurred a net loss of Rs 48 crore in 1998-99, Rs 40 crore 1999-00, and Rs 152 crore in 2000-01. After writing off the accumulated interest in 2001-02, it had posted a cash surplus of Rs 57 lakh. But in 2002 again the net loss touched Rs 200 crore and that for the last fiscal is estimated at Rs 206 crore. On the other hand following the setting up of the ammonia plant, the expenditure of the company had also jumped up from Rs 1,101 crore in 1997-98 to Rs 1,137 crore the next year and to Rs 1,728 crore in 2000-01. In 2002, after the closure of the urea plant, the expenditure dropped to Rs 1,287 crore, then the turnover of the company fell from Rs 1,772 crore to Rs1,393 crore. Thus, the escalating expenditure reflected the adverse effects of the new plant, which had to be set up following the closure of the tank, he argued. The Supreme Court had disposed off the company's appeal in February this year saying that the tank can continue in service in the present condition subject to certain measures being taken by the company as suggested in the report of the Engineers India Ltd, which was entrusted by the Apex court to study the structural integrity of the tank and its operations. Mr Pillai said that the restructuring alone would not be sufficient for the revival of the company. The State Government would have to reduce sales tax and power tariff, withdrawal of entry tax of 29 per cent and allotment of mini hydel projects for FACT. The reasons for the losses, he said, were changed fertiliser policy, increase in other raw materials, energy, transportation costs, unwieldy manpower strength, glut in captrolacturm markets and loss due to ammonium sulphate and inadequate earlier efforts towards expansion and diversification.
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