Kochi: The $1.2 billion seafood industry, which has been passing through a rough patch thanks to fall in output and exports, is facing yet another crisis with a slew of seafood units facing the threat of arbitration from the Marine Products Export Promotion Authority (MPEDA). The export promotion body has slapped legal notices on a number of seafood units for their failure to adhere to the agreement on equity buyback. The seafood exporters, however, had sought time from the commerce ministry and MPEDA for buying back the equity citing the tight liquidity scene in the industry.Top officials of MPEDA told The Financial Express that the export promotion body has served legal notices to a slew of seafood units spread across the country for their failures to buy back the shares subscribed by MPEDA.
Like the industrial development corporation, MPEDA helps the seafood units to raise capital by subscribing to a portion of the equity stake offered by the company. Under the agreement, the promoter of thecompany is expected to buy back the share at a later point of time.
Earlier, MPEDA stipulated a five years time span from the date of commercial operations of the units to buy back shares. However, the agency has later changed this clause and made it mandatory for all companies to buy back shares five years since the release of fund.
Under the agreement the companies should buy the shares back from MPEDA either at the ruling market value or a sum equivalent to the amount given with a simple interest net of dividend paid, whichever is higher. MPEDA can invoke legal measurers including arbitration to get its capital back if the companies failed to adhere to this agreement.
Under the scheme, the export promotion agency has financed 33 companies by shelling out nearly Rs 12 crore for picking up equity stake in them. Out of this only six companies have adhered to the agreement and the remaining 27 has failed to honour the agreement. Sources said, in Kerala alone the agency has financed six companies of whichthree had already bought the shares back from the agency. Following this, the country's premier marine export promotion agency has decided to go ahead with legal measurers to recover the capital invested.
However, the cash-strapped seafood units, is finding it difficult to stick to the agreement. Industry sources said that given the current crisis prevailing in the seafood sector, it is difficult for the industry to buy back the shares as the cash flow of the industry was hit hard by dip in exports and a squeeze in margins. The industry has approached the commerce ministry and MPEDA seeking breather from legal measures.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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