DoF ropes in Deloitte for turnaround of FACT

Written by Sanjay Jog | Mumbai, Mar 28 | Updated: Mar 30 2008, 03:34am hrs
The department of fertilisers (DoF) has roped in Deloitte Touche Tohmatsu India to conduct a turnaround strategy for the loss making Fertilisers & Chemicals Travancore Limited (FACT). The study is expected to be submitted by early April, 2008.

The department of fertilisers has resorted following the rise in FACTs rising cumulative loss. The cumulative loss for the period April, 2007 to February, 2008 is reported at Rs 175.96 crore compared to Rs 129.82 crore during the same period last year.

Informed sources told FE The losses suffered by the company are on account of various reasons. The company has three productsfactamfos (20:20:0:13), ammonium sulphate and caprolactam. Ammonia is required for the production of all the three products. Since NG/LNG is not available at Cochin, FACT is using naphtha as feedstock for producing ammonia. The source also said, the cost of naphtha is about six times higher compared to the cost of LNG. The captive ammonia produced by FACT (at Rs 23,050/MT) is therefore much costlier than the gas based ammonia (Rs 8,000/MT), he added. The additional cost due to naphtha based ammonia is not fully compensated in the present subsidy schemes leading to losses to the company.

Further, FACT had been facing financial problems in the last few months due to a steep increase in the prices and nonavailability of sufficient quantity of raw materials like sulphur and phosphoric acid. The caprolactam plant and ammonium sulphate plant had to be closed temporarily. To compensate the losses of the company and to sustain its operations, the government has approved a one time grant of Rs.200 crore to FACT. The amount is being released to the company. With this cash assistance, the companys working capital position would improve and the company would be able to operate all the plants including the closed plants at Udyogamandal Division.

Sources said that the company is currently using imported ammonia which has turned out to be cheaper than the cost of captive ammonia for fertilizer production. Moreover,

FACT has recently singed a joint venture agreement with Cochin Shipyards for Fact Engineering Works.