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Kerala government espouses FACT cause, to seek Centre's help

Our Correspondent in Thiruvananthapuram

The Kerala government has decided to take up the cause of the crisis-ridden Fertilisers and Chemicals Travancore or FACT, the largest public sector undertaking in the state, with the Central government.

As a first step, a state delegation headed by Chief Minister E K Nayanar would meet the ministers concerned in New Delhi and submit a memorandum, listing out the problems faced by the company.

The state government decided to take up the company's case as a state issue following detailed discussions between the chief minister, other ministers and trade union leaders.

The decision is the outcome of the campaign launched by the Save FACT Action Committee, which was constituted jointly by 13 trade unions representing both the workers and officers of the company to save the company from an impending closure.

The trade unions, irrespective of their political affiliations, had joined hands together following the call given by the management for sacrifices from the workers to ward off the serious crisis. The management had recently unveiled its corporate strategy proposing a 20 per cent reduction in the present work force, a ban on recruitment, a wage freeze and other measures to tide over the present crisis.

The company, which had been making profit consistently for the last 15 years, landed in crisis with the commissioning of the Rs. 6.18 billion ammonia plant. The plant was taken up by the company following the greens campaign against its cold storage plant at the Cochin Port. But it proved to be an economic disaster as the cost of the domestic ammonia proved higher than that of imported ammonia.

The plant was set up with the help of loans availed from the Overseas Economic Cooperation Fund of Japan. While the plant is currently idle, the repayment of the capital and interest has become due, imposing a severe burden on the company.

The crisis came at a time when FACT was grappling with the problem of mounting inventories in its petrochemicals division. The decline in the demand and influx of caprolactam from foreign suppliers at very low prices has compelled the company to reduce production. Although the company tried to push the sales by reducing prices from August this year, it has not proved successful.

The phosphatic fertilisers unit of the company is also not operating in a cost-effective manner, as the price is administered by the government. As against this, the input costs have been escalating due to various factors. The weakening of rupee against US dollar has pushed up the costs of imported raw materials.

As a result, the company has incurred a loss of Rs 800 million in the first six months of the current financial year. The loss is likely to mount to Rs 1 billion by the end of the current financial year, according to company sources.

The company had made a profit of Rs 540 million during 1997-98, in spite of a crippling power shortage. The trade unions do not think that a permanent solution to the crisis is not possible without help from the Central government. They feel that the government should change some of its policies to keep the unit going.

They do not think that the measures suggested by the management are practical and could solve the problems in the long run. Trade union leaders feel that the problem had aggravated due to lack of foresight in the management.

They felt that the ad-hoc management has been responsible for bringing the company to this plight. FACT had been without a permanent chairman and managing director for the past one year.

Trade union leaders feel that the need for sacrifices by the workers would not have arisen if the management had thought of alternate strategies. They demand a change in the present management and appointment of a full-time CMD to steer the company from the present crisis.

Business news

Kerala