Date:22/12/2004 URL: http://www.thehindubusinessline.com/2004/12/22/stories/2004122201590200.htm

Back `Change in urea pricing policy key to Madras Fert turnaround'

Our Bureau

Chennai , Dec. 21

THE management of Madras Fertilizers Ltd, which has become a sick company, held out promise that, Centre willing, the company could break even in the current year and turn a profit of Rs 80-100 crore in 2005-06.

Addressing shareholders here today, MFL's Chairman and Managing Director, Mr Sukumar N. Oommen, said that the company's accumulated loss as on March 31, 2004 was over Rs 208 crore and its net worth has been totally eroded. Subsequently, its losses have mounted by another Rs 80 crore between April and November.

However, according to Mr Oommen, the losses were primarily due to the urea pricing policy announced in 2003. Its financial performance does not reflect the fundamental strengths in terms of productivity and efficiency, he said.

The ammonia and urea plants reached 75-85 per cent capacity utilisation during 2003-04 and these touched 98-99 per cent in the current year. Energy efficiency was better than the norms laid down for it and match the best in the industry.

Warehousing costs have been cut by 50 per cent to improve market realisation. Manpower, which has been cut substantially, will be brought down further in the coming months. Employee productivity has gone up to 900 tonne a worker from previous year's 581 tonnes.

Financial institutions and banks have accepted the company's proposals for corporate debt restructuring, which resulted in benefits of Rs 22.72 crore during the year.

Mr Oommen said that despite these efforts the company lost over Rs 63.74 crore during the year because of the pricing policy of urea, which was based on a group-wise reimbursement of costs rather than the earlier plant-wise compensation.

The Government had reviewed the performance of the company in August, when the Union Fertiliser Minister visited the plant. He had acknowledged that the company was fundamentally strong. The Government is considering changes in the pricing policy aimed at compensating the company in an equitable manner.