The Hindu Business Line : Merger of sick seafood units proposed

THE Kerala State Industrial Development Corporation (KSIDC) has mooted the amalgamation of a number of troubled seafood processing units to form a single entity in a bid to help them overcome their present financial crisis.

There are around 90 sick seafood units in India against many of whom the Debt Recovery Tribunal has initiated proceedings. Collectively these units owe around Rs 260 crore to various banks and financial institutions. More than half of this amount is accumulated interest on loans.KSIDC, which has been a lender to around 20 units, had conducted a study on the seafood industry before coming up with the proposal for amalgamation, an official said.

The Seafood Exporters Association of India (SEAI) and the Forum of Revival and Reconstruction of Seafood Export Industries in India are now supporting the proposal, which suggest that 10 or more units be amalgamated into one company so that it will have stronger financials and better economies of scale.

As a first step towards this plan, six units in Kerala have come together to be amalgamated into a single firm. However, these units now require approvals of their lenders to go ahead with the scheme.

"Amalgamation is an optional scheme for the units. But it is the only way we can revive the sector," said Mr Antony Varghese, President of the forum. His company, Koluthara Exports Ltd, is one among the six units.

According to the SEAI, the seafood units started incurring losses and eventually turned sick because of a number of reasons that were "beyond their control."

Incidents such as plague in Surat, disease in aquaculture farms, blacklisting of cooked shrimp by the US and ban on Indian seafood announced by the European Economic Community (EEC) are factors that contributed to the weakening of the industry.

On the other hand, processing units had to invest in modernising their facilities to remain competitive in the global markets, says Mr Varghese. "There was not sufficient raw material available and competition in the sector was unhealthy too," he says.

The SEAI and the forum are now seeking the help of Indian Banks' Association and the Finance Ministry to settle their dues to the banks.

According to the SEAI, a similar model of amalgamation was tried out successfully in Iceland 20 years ago.

About 100 sick traditional seafood units in that country were amalgamated into 10 units to achieve turnaround.

A State Government committee, comprising the Fisheries Secretary and officials of Kerala State Industrial Development Corporation (KSIDC) and Marine Products Export Development Authority (MPEDA), had studied the proposal and found that "it is prima facie viable," an SEAI official said.