`Union Govt. largesse can bail out FACT'

By K. Venkiteswaran

KOCHI, OCT. 29. The largest public-sector undertaking in the State, Fertilisers and Chemicals (Travancore) Limited, is looking forward to the promised largesse from the Union Government to bail out the cash-strapped organisation which has been going through one crisis to other during the past few years.

In an interview to The Hindu, the chairman-cum-managing director of FACT, Mr. T.T. Thomas, exuded optimism that there would be `positive gestures' from the authorities soon so that the present financial difficulties of the undertaking could be tided over. Mr. Thomas who is laying down office this Wednesday after 37 years of service in FACT, is optimistic that a financial package which envisages wide-ranging interest relief, capital investment and loan waiver would see the organisation doing the turnaround and marching towards profit. The present picture is not at all rosy and as per the unaudited financial results for the three months ended September this year, the public undertaking has incurred a loss of Rs. 50.72 crores as against Rs. 23.61 crores during the same period in the previous fiscal. The net loss last year was in the range of Rs. 151.95 crores and the accumulated losses would run into more than Rs. 240 crores. There has been significant increase in loss during the current quarter compared to the corresponding quarter in the previous year mainly on account of decrease in the net realisation of Factomfos and Caprolactam and shutdown of Ammonia and Urea plants in Cochin Division.

The chairman mainly attributed the vagaries in the price of caprolactam and the production drop as the reasons for the public undertaking incurring loss during the past few years. He said that FACT should be looking for a period of consolidation in the coming months and every individual who is interested in the welfare of the organisation should look forward to a package (reported to be of the order of Rs. 80 crores to Rs. 150 crores) which could make the unit healthy and get it out of the present financial mess. According to him, mainly three steps are needed to bring back the unit to a stage of fighting fitness: financial package from the Union Government, implementation of the Tariff Commission recommendations on Complex Fertilisers, and improvement in the price of Caprolactam. The present practice of fixing fertiliser prices on a "pro rata basis" without considering the cost of production had done immense harm to public-sector units like FACT, he points out. FACT has naphtha as raw material for caprolactam production and the cost is comparatively high but the price fixation is not commensurate with the cost of production incurred by FACT, he says. The practice of `ad hoc subsidy' for complex fertilisers had also not been fully beneficial to FACT. Let alone getting the full cost of production, more often than not the ad hoc subsidy had not been realistic and at times had only met a fraction of the real cost, he avers.

He details the ups and downs in international price of caprolactam which had been doing a zig-zag from US $850 in August 1999 (per tonne) to $1,400 in March 2000. It again fell to $1,000 in January this year and at present was hovering around $850. Though caprolactam production was only in the range of 52,000 tonnes by FACT, it had a virtual monopoly and it is a single product which could see the company tide over the present crisis, he feels. Caprolactam accounts for a turnover of Rs.376 crores out of the total turnover of Rs. 1,836 crores of the company.

Moves were afoot to go in for internal cost reduction in a big way, he says, and what was the need of the hour was to ``internalise our problems''. He glosses over the recent crises like the fire in the petrochemical division , the agitation by casual workers of KSINCO who virtually stalled the movement of barges carrying ammonia and chemicals from Udyogamandal to Cochin Division and the long stalemate over the `pension age' reduction issue which got politically involved. Focus should be on productivity increase and to get the best out of the employees rather than sticking to old world norms which could render any profit-making company a leviathan in the present rat race of competition, he feels.

About the Voluntary Retirement Scheme (VRS), Mr. Thomas was candid enough to state that no management could "gloat" over the fact that it had sent out many workers, albeit with a golden handshake. This financial year FACT had reduced its staff by 509 and during January-September, by 599. The total number of employees on the rolls as on October 1, this year was 6,691. During 1991-92 the figure was 9,154 and the optimum number of employees as per a recent survey was 5,253. He said that the workers' unions had already agreed to 20 per cent cut in staff strength and the target fixed for 2003 was 6,000 employees which is not a tall order, he feels. Though no recruitment had been taking place during the past three or four years, it was time to think about a recruitment ban, the chairman said in response to a query.

Asked about his vision for FACT considering his long innings in the organisation, Mr. Thomas said high capacity utilisation was essential if the unit was to make strides in the coming years. He cites the example of energy cost in caprolactam production as $1.9 per kg if natural gas was used and two dollars if other conventional raw materials were used. But in the case of naphtha, it was as high as $5.5 to six dollars. Though `Manmohanomics' looks down upon agricultural subsidies, the WTO does recognise the imperative of food subsidy especially for developing countries. While in India, the agricultural subsidy was only to the tune of five per cent, it was as high as 42 per cent in the European Union and 50 per cent in the U.S., he reminds.

Asked about the temporary shut down of urea plant and stoppage of production, he said the Government was going in for large- scale import of urea, especially from the CIS countries. He said that most of the subsidiaries of FACT like Fact Engineering and Design Organisation, and Fact Engineering Works were getting newer orders against global competition.

Mr. Thomas who is also the honorary secretary of the All-India Management Association has his own views on the economy. He feels that better focus should be there on the agricultural sector and the present lop-sided approach of ``enticed by IT and Computers'' should be corrected. He hopes there would be a productivity revolution in the agriculture sector by improvement in yield, better post harvest technology, avoiding wastage, large-scale value addition, durable processing technologies and better marketing. The challenge of the managerial cadre was to turn around the brick and mortar units which are struggling due to a variety of reasons rather than priding in achievements like having more Techno parks and better software export. A back to roots campaign with the bulwark of agriculture as the core focus can alone save the State, he adds.

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