Financial Daily from THE HINDU group of publications
Monday, Aug 23, 2004
Financial Daily from THE HINDU group of publications Monday, Aug 23, 2004 |
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Logistics
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Shipping Industry & Economy - Fertilisers Contentious issue of ammonia movement V. Sajeev Kumar
A former Chief Justice of the Supreme Court will act as the arbitrator. ABC & Sons (Ardeshir B. Cursetjeee & Sons), through a public notice, has come out against the termination, substantiating its arguments against the violation of the contract it had entered into with FACT for the movement of ammonia barges through inland waterways. The FACT management had terminated the contract last month owing to the high cost of movement of ammonia through waterways and decided to move the cargo by road. According to FACT officials, the existing rate of moving ammonia by barges from the Udyogamandal division to Ambalamedu, in the Kochi Division, is Rs 2,017 per tonne, whereas by road, it would be around Rs 150 per tonne. FACT transports around 1.85 lakh tonnes a year and the savings will thus be around Rs 27 crore, the officials said. ABC had obtained the contract for a seven-year period till 2008, first signed in 1986 and revised subsequently. In the public notice, ABC has pointed out that the statements referring to the high cost of transporting LAG by barges ignores the facts and circumstances that have a bearing on the cost of transportation. The company is, in no way, concerned with the decision to transport ammonia by barges. The initial transportation in 1989 was undertaken as there was no railway siding at Udyogamandal and as the transportation by road, though more economical, was environmentally not acceptable, as LAG is a hazardous and deadly toxic gas. The contract dated February 19, 1997, the subject of the present statement and controversy, was entered into only because of environmental and safety compulsions, as is apparent from various sworn affidavits filed by FACT in the Kerala High Court mentioning that transport by road is hazardous and dangerous. The supply and linkage of raw materials for the new ammonia plant, cleared by the Environment Ministry, was on the basis of naphtha to be carried by pipelines and ammonia by barges, not by road. The public notice went on to say that ABC had invested a huge amount of money at FACT's behest for the acquisition of these specialised barges, to carry out the operations on a build-own-operate basis. Moreover, it has ensured accident-free transportation since 1990. It has taken a comprehensive Protection and Indemnity (P&I) insurance policy to cover marine and environmental damage, loss or damage to port property, and for loss of life or injury to personnel on shore due to leakage of ammonia gas. In 1995, FACT had entered into discussions to modify the old contract. All the investment details to build the new barges were considered at that time by ABC, including availing of sealed quotations from PSU shipyards. But, at the behest of the Fertiliser Ministry, FACT was made to go in for global tenders. ABC quoted Rs 2,000 and finally reduced its rate by Rs 450 at the rate of 20 per cent to Rs 1,550. The rates were much higher than the 1986 contract as the cost of the two new barges had gone up several times. The distance was double and equipment needed was twice that mentioned in the 1986 contract, the notice said. Various trade unions of the company, at that time, had filed petitions in the High Court seeking directions to order a CBI enquiry into the circumstances under which the contract was signed. These petitions were dismissed on merits and the judgment recorded that all the relevant files in this regard were placed before the court to show that there were discussions, negotiations and then the final settlement. However, it was only recently that FACT was able to persuade the Ministry of Environment to permit transport of LAG by road, citing its poor financial position. It also persuaded the Ministry of Chemicals and Fertilisers to get it an environmental clearance for the same. Though FACT has been aware of the economics of road, rail and barge transport since 1987, it never transported significant quantities of LAG by road due to safety reasons. Now, it is ironical that FACT has gone against its own affidavits filed in courts stating that transportation by road is unsafe, the public notice said. Regarding the high cost of transportation of LAG by barges, the public notice said FACT had incurred losses of over Rs 200 crore per annum, as per the published accounts and balance-sheet of the company for 2002-03, while ABC's contract value is only Rs 26.40 crore per annum.
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