Date:13/12/2005 URL: http://www.thehindubusinessline.com/2005/12/13/stories/2005121302380800.htm

Back PSU recast board okays FACT revival package

G.K. Nair

The company had requested the Centre to write off 50 per cent of the total outstanding loan amounting to Rs 574 crore and convert the balance 50 per cent into equity.

Kochi , Dec. 12

THE Board for Reconstruction of Public Sector Enterprises (BRPSE) has recommended the revival package submitted by the management of the ailing Fertilisers and Chemicals Travancore Ltd (FACT) at its meeting recently.

The recommendations of the Board would now be sent to the Finance Ministry, company officials told Business Line.

The revival package, which was cleared by the Fertiliser Ministry, has been pending with the BRPSE for some time now.

The company management has re-submitted its earlier proposal, trimming it as desired by the BRPSE. The Fertilisers and Finance Ministries are convinced of the future prospects of the company, especially after the expected commissioning of the LNG terminal here by the last quarter of 2009, they said.

The company had, in its proposal, requested the Centre to write off 50 per cent of the total outstanding loan amounting to Rs 574 crore as on March-end and convert the balance 50 per cent into equity. Besides, it had sought waiver of the Rs 81 crore outstanding towards interest as on March 31 last.

According to the sources, the fertiliser pricing policy, coupled with high cost of the raw material - naphtha - had driven the company into the red. They said that when the ammonia and urea plants were set up the price of naphtha was around Rs 4,000 a tonne, whereas, now, it is ruling above Rs 20,000.

Once the revival package is approved and the company is put back on the track, it would be able to break-even in two years, they said.

Given the growing demand for fertilisers and a drop in production, revival of FACT would be in the interest of the industry, they claimed.

"Production capacity of the fertiliser units have been reduced, when the consumption is growing at five per cent per annum," they pointed out. Added to this, the price of caprolactum, one of the products of FACT, has also crossed Rs 1 lakh a tonne. They said the urea plant at Ambalamugal needs to be modernised. "It has tremendous potential for expansion once LNG becomes available to the company." The terminal, which is going to be the first in the South, would place FACT at a comfortable position.