The Hindu Business Line : MFL awaits revival package approval as losses mount

Chennai, Sept. 12 Madras Fertilisers Ltd (MFL) has entered into an agreement with Indian Potash Ltd for the supply of Rs 300 crore worth of raw materials spread over three months to support MFL’s bid to restart NPK fertiliser complex production, according to sources in the know.

The company, which has been affected by the fertiliser pricing policy over the last five years, has over Rs 650 crore in accumulated losses and is facing a stiff liquidity crunch.

As a part of the measure to augment cash flow, the company has also leased over five acres to Chennai Petroleum Corporation Ltd for a 25-year period, which is expected to bring in Rs 40 lakhs month for MFL. CPCL is the main feedstock — naphtha — supplier for the fertiliser company, the sources said.

The company has now started maintenance work on the NPK (complex fertiliser) plant which has a capacity to manufacture over 8 lakh tonnes of NPK a year. It operated at 4 per cent capacity in 2007-08 because of raw material constraints.

Now with support from Indian Potash, the company hopes to produce complexes other than its flagship combination 17:17:17, which has equal portions of nitrogenous, phosphatic and pottassic nutrient content.

The new complexes would be nitrogenous and pottasic complexes without phosphate content — the main constraint.

Revival plan

The sources said that these are stop-gap measures that are aimed at keeping the company with its workforce of over 3,000 running. MFL needs the revival plan pending with the Fertiliser Ministry for over three years now to be implemented. The MFL Staff Union which represents the workers has also taken up the issue with a delegation recently meeting the Central Government authorities and the Ministers concerned.

Union representatives said that the delegation last month was one of several that have made such representations since the present Government took over. The Fertiliser Ministry has since then been promising that the revival package would be expedited but no action has been taken. MFL has its inherent strength in efficiency — last month it turned in a record production of urea, nearly 50,000 tonnes, at high levels of energy efficiency. But the pricing policy of the Government was adverse to the company.

The company, in its annual report has attributed the reason for its losses to the pricing policy which resulted in an under recovery.

Since the shift in fertiliser subsidy policy from 2002 with the Price Concessions Scheme for complex fertilisers, MFL has been hit by under recovery. Since then the company has lost over Rs 59.44 crore, according to its annual report. Similarly, in 2003 when the new pricing scheme was announced for urea, the company was again hit and the under recovery since than is estimated at about Rs 455.86 crore.

The Board for Reconstruction of Public Sector Enterprises had in its recommendations in March 2005 addressed this issue but the Government is yet to take a decision on it.

Following the revival plan proposed earlier, the company has also submitted a revised proposal for restructuring based on a study by Deloitte Touche Tohmatsu India (P), which according to sources in the know, has addressed issues of adverse effect of the fertiliser subsidy policy of the Government on the company, infusion of funds and debt restructure. This again is pending with the Department of Fertilisers since July.

More Stories on : Sick Units | Fertilisers

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page