Fertilisers and Chemicals Travancore to get govt aid.

The government is set to bring in a relief package for the revival of the Kerala-based Fertilisers and Chemicals Travancore (FACT), a company on the verge of shutdown having generated an accumulated loss of R522 crore till date.

Considering the accumulated losses and erosion of net-worth of FACT, a comprehensive financial relief package was recommended by the Board for Reconstruction of Public Sector Enterprises (BRPSE).

What has plunged the company into crisis is that despite having converted its plants to use gas, instead of naphtha as feedstock, the high prices of imported RLNG supplied by Petronet LNG has upset the commercial viability of its operations.

“Based on the recommendations of BRPSE, a draft note has been circulated for inter-ministerial consultation before seeking the approval of Cabinet Committee on Economic Affairs,” a ministry official said. According to a company executive, FACT stopped manufacturing ammonia on account of high cost of feed stock (liquefied natural gas). “The operations with LNG without suitable compensation is leading to heavy cash loss,” the executive said.

Due to severe financial crisis, the company defaulted in payment to gas suppliers like GAIL and Petronet LNG. Subsequently, FACT has stopped manufacturing ammonia, using high cost RLNG. For meeting the production of end products, FACT is procuring imported ammonia.

The government approved revision of domestic gas price from present $4.2 per mmBtu to around $8, effective April 1, 2014.

According to the ministry official, the central government is also evaluating a relief package for another Kerala-based company called Hindustan Organic Chemicals (HOCL) which incurred losses of about R81.66 crore in the first half of financial year 2013-14. “After the withdrawal of anti-dumping duty on phenol and acetone from 2011, the company has been making losses as it had to sell its products below production cost in competition with the cheap imports being dumped into India. The government is looking into its revival plans as well,” said the official.

Source : financialexpress.com