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Deeptha Rajkumar

KOCHI, Feb. 17

ESCALATING tensions between US and Iraq and the subsequent rise in crude oil prices have raised questions about the survival of the Fertilisers and Chemicals Travancore Ltd (FACT).

FACT, which is already under tremendous pressure from Kochi Refineries Ltd (KRL) for having overshot its credit limit for fuel, received another body blow with the increase in prices of benzene from Rs 20,000 per tonne to Rs 36,000 per tonne.

Benzene, ammonia and sin-gas are the raw materials required to run FACT's Caprolactum unit at Udyogamandal. At present this is the only plant operating at 100 per cent load factor in Udyogamandal. "The increase in prices has raised doubts about sustaining operations at the Caprolactum unit," senior company officials told Business Line.

Severe liquidity crunch had forced the company to shut down its urea and ammonia plant at the Cochin division almost a week ago. "We require naphtha and furnace oil to run this unit. That translates to around Rs 1.5-crore worth raw materials everyday. However the returns accrue only over a period of two-three months. And given that our cash position was not good and with our profit margins under pressure, we decided to shut down operations in the unit on February 8, 2003," they said.

The urea plant, which had been closed down for over 18 months owing to problem in the boiler, had recommenced operations only in December 2002 after repair works of nearly Rs 4.7 crore. The plant commenced operations with 75 per cent load factor and started producing urea by the first week of January.

Liquidity crunch has also impacted the operations of other functioning units at FACT. While the Factomfos plant is running at 50 per cent load factor, the only other ammonia plant with a capacity of 900 tonnes per dayat the Cochin division is running at 65 per cent capacity due to non-availability of furnace oil and naphtha.

And with payment issues yet to be resolved with KRL, Mr P.R. Balasubramanian, Chairman-cum-Managing Director, FACT, said that the company proposed to ration out its existing supply of fuel. "With our current supply we can carry on operations till February 21," he said.

The date is significant for it is the deadline set by KRL asking FACT to provide post-dated cheques for the supply of fuel effective for payment during May and June.

It is reliably learnt that despite the Central Government intervention, Kochi Refineries has refused to extend a line of credit to FACT. "Our current agreement with KRL is purely on a cash and carry basis," the CMD said.

FACT had early this year overshot its industrial credit limit with KRL, with the latter having stopped supply for non-payment of dues. As per the agreement KRL allows a credit of up to Rs 90 crore for a two-month period. However, the chemical company had overstepped its limit with the overdues being in the range of Rs 15-20 crore.

"The fertiliser business is a piece meal business where we have to give extended credit and await returns. Currently there is a glut in the market as it is a lull period. Running of the plant depends on inflow of funds from the market. And collections would improve by the end of the month. So I am hopeful that by the end of the month we would have enough in the kitty to ensure operational status," Mr Balasubramanian said.

Meanwhile, the management is also exploring other avenues whereby the beleaguered unit could win some reprieve. It is reliably learnt that the company has also approached the Union Fertiliser Ministry for assistance.

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