CPCL refuses to extend credit for naphtha Madras Fertilizers to be shut down from tomorrow

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Our Bureau

Chennai, Jan. 30

WITH oil companies not willing to sell naphtha on credit beyond January 31, the state-owned Madras Fertilizers Ltd (MFL) will be shut down from February 1 as it does not have money to pay for naphtha.

The Government owes the company more than Rs 200 crore as subsidy on urea and towards escalation of raw material costs. MFL's liabilities, including its dues to Chennai Petroleum Corporation Ltd (CPCL), which was supplying it naphtha, a feedstock, is Rs 189 crore.

The company's management and its labour union have written to the Petroleum Ministry asking it to extend credit facilities to MFL so that it can continue to run its plant.

This situation has come about at a time when the company has reduced its loss in the third quarter of the financial year and also achieved higher operating efficiencies, according to MFL's Chairman and Managing Director, Mr Sukumar N. Oomen.

Till now, CPCL was extending 50 per cent credit to MFL for naphtha, a facility it is no longer prepared to continue, according to Mr Oomen.

"MFL is on the verge of closing down operations from February 1. It is only because we do not have money to pay for naphtha," he said.

Mr Oomen said that company's board of directors, which met on Thursday to take on record the unaudited third quarter results, was apprised of the developments.

The workers' union also met the directors and told them that the Government should intervene and ensure that MFL was not shut down. Mr R. Kuchelan, President, Madras Fertilizers Staff Union, told Business Line that the move by an arm (Petroleum Ministry) of the Government not to extend credit would make the company sick after which it would be easy for those pushing for privatisation of MFL to go ahead with their plans on the ground that it was no longer a viable proposition to operate the plant.

He said the union had formed a joint action council involving labour unions in plants in Tiruvottiyur and Ennore and would embark on an agitation if the Government did not intervene and ensure the continued operation of MFL's plant at suburban Manali.

Mr Oomen said that the urea plant was operating at a capacity utilisation of 110 per cent and the energy efficiency in the third quarter was much better than the group energy norms specified for naphtha-based plants. For instance, against an energy efficiency of 7.847 GCal (Giga Calories) a tonne, MFL's plant had an energy efficiency of 7.64 GCal in October 2004, 7.45 GCal in November and 7.27 GCal in December.

The ammonia plant's capacity utilisation was 85 per cent and that of the complex fertiliser plant 43 per cent, which was mainly because the company could not procure raw materials.

Mr Oomen said if MFL shut down its plant from February 1 the process of completely shutting down the plant would take two or three days there would be a shortage of urea in the market, which would affect the kharif crop. MFL could produce up to 485,000 tonnes a year of urea.

He said that in the third quarter of this financial year, MFL recorded a loss of Rs 5.14 crore on sales of Rs 377.50 crore against a loss of Rs 9.14 crore on sales of Rs 341.68 crore for the same period last year. For the nine-month period ending December 31, 2004 the company posted a loss of Rs 79.27 crore on sales of Rs 961.15 crore compared to a loss of Rs 24.71 crore on sales of Rs 823.11 crore for the corresponding previous period.

(This article was published in the Business Line print edition dated January 31, 2005)
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