Madras Fertilisers recast proposal drawn up

Madras Fertilisers on Monday informed the stock exchanges that the Board for Reconstruction of Public Sector Enterprises (BRPSE) has recommended measures to help the company tide over its financial problems.

The company has promised to rely on the market for future funding and prune staff strength to 1,000.

The financial benefits to the company would come through changes in fertiliser pricing, an interest waiver on government loans, and a government guarantee to debt that Madras Fertlizers is to raise to solve its liquidity problems.

Sukumar N Oommen, chairman and managing director, Madras Fertlizers, said: "We are hopeful of getting the money within a month."

The recommendations will have to be approved by the Cabinet before they can take effect.

In the area of fertiliser pricing, the government has increased the "outlier benefit" under the new pricing scheme from the existing 50 per cent to 70 per cent for the years 2003-04 and 2004-05. This means the government reimbursement for the company's cost of production would increase.

Another benefit in the area of pricing would be a modification in the complex grades of fertilisers. BRPSE has recognised the use of urea in sourcing nitrogen. Nitrogen can be sourced through ammonia and urea, but Madras Fertilizers' production process allows it use only urea.

Financial benefits outside regular operations would come in the form of a government guarantee on Madras Fertilizers' paper and an interest waiver. BRPSE has recommended that, of the total interest of Rs 18.4 crore that had to be paid, the government waive interest of Rs 16.8 crore for the year 2003-04.

The government guarantee would underpin Madras Fertlizers' fund raising through loans to the tune of Rs 150 crore, thus lowering the costs, said an official. The aim of the debt programme is to replace existing high cost loans.

The financial benefits suggested would be accompanied by a withdrawal of some government support to the company.

Madras Fertlizers has made a commitment to avoid approaching the government for plan or non-plan funds. In addition, Madras Fertilizers has said that it would prune staff strength to 1,000 through a voluntary retirement scheme.

Oommen said staff strength currently stood at around 1,150 people. A voluntary retirement scheme had already been notified by the company.

Finally, BRPSE has set Madras Fertilizers' a turnover and profit target. It has to achieve a turnover of at least Rs 200 crore a year from the current fiscal and a corresponding net profit of Rs 50 crore.

For the nine months ended December 2004, the company registered a net loss of Rs 79.27 crore on sales of Rs 961.15 crore.