Duncan Industries' operations hinge on pact with IOC

Employees of the GP Goenka-controlled Duncan Industries are fast losing hope that the fertiliser plant will restart operations any time soon.

The factory had shut down for the second time in October last year, after operating for roughly 38 days. This was preceded by a 40-month lock out.

Since October 2005, liabilities are mounting at about Rs 7 crore per month. The price of Naphtha, the feedstock for fertilizer, too has gone up sharply since then. Naphtha now costs around Rs 95 crore per month against Rs 80 crore earlier.

Another negative factor is that the government had assured that once the production of a fortnight was distributed, it would release a subsidy within 15 days. The subsidy, however, was released in two and a half months.

Therefore, to be able to restart production, the company has to have a working capital of two and half months, which amounts to Rs 250 crore. The company's management has reportedly expressed its inability to make available this amount.

The company received a subsidy of about Rs 58 crore in December for the earlier working of thirty-eight days. The money, however, was spent on paying the power bills to the local electricity company, Kesco, or on administrative and maintenance expenses.

Earlier the company and the Indian Oil Corp, its Naphtha supplier had reached an agreement under which IOC had agreed to release its naphtha payment once the company received its subsidy from the government.

For this an escrow account had been created where the subsidy of the company would be transferred.

However, after the company's check bounced, the arrangement broke down. Renewed efforts have been launched and if the IOC renews the agreement on the same terms, the management may be able to arrange the remaining amount required to run the mills.

Meanwhile, changes have been made in the top positions of the company. Ashwin Mehta, an old Unilever hand has replaced Viren Kaushik as the MD of the company. Deepak Bhandari from the Goenka stable will replace Abhay Bhargava as the financial controller.

Duncan industries has about 90 workers on rolls and its installed capacity for fertiliser is 7,22l tonnes.