Chennai, March 22
MADRAS Fertilizers Ltd (MFL) has stopped producing complex fertilisers due to cash crunch following delay in release of subsidy by the Fertiliser Ministry, according to MFL officials.
MFL continues to source feedstock on credit from Chennai Petroleum Corporation Ltd (CPCL), which has for some time been threatening to discontinue credit and change to cash-and-carry basis. But the company is optimistic that the subsidy of Rs 360 crore due to MFL, which has been pending from November 2004, would be released soon, according to officials.
Sources in the know say that due to the delay in release of subsidy by the Fertiliser Ministry, MFL has had to cut back on production. In the last 10 days, it has shutdown production at the complex fertilisers unit, which earlier was operating at 85 per cent capacity. Urea production is continuing with the plant working at 105 per cent capacity.
Meanwhile, it has committed to CPCL to catch up on payments once the subsidy is released. This would enable the companies to get back to transactions on normal commercial terms, which provide for one-month credit. MFL is negotiating with the oil company to increase the credit period to 60 days, they said.
Last month, MFL expressed fear that it would have to shutdown the facility fully since CPCL was planning to stop supplies of feedstock on credit basis to MFL.
CPCL officials told journalists recently that supply of feedstock was continuing despite Rs 120 crore outstanding.
It had not stopped supplies but would shortly insist on cash-and-carry terms for delivering the feedstock.