Krishak Bharati Cooperative Ltd (Kribhco), India?s second-largest urea maker, is set to be free of government interference?a freedom that comes after a four-year face-off with Ramvilas Paswan-led fertiliser ministry for autonomy by returning the Centre?s equity at par.
The Delhi High Court recently quashed a December 2006 order by the department of fertilisers (DoF) that asked Kribhco to stop attempts to repatriate government capital ?unilaterally.? Stressing that the Centre?s stance was ?diametrically opposite? to the opinion of the attorney general of India, the court ordered the ministry to deposit Rs 50,000 as costs to the chief minister?s Relief fund, Bihar.
The government holds 67.59% shares in Kribhco and several state co-operatives hold the rest. ?In an attempt to bring down government shareholding below the 50%-mark, Kribhco has sent a cheque of Rs 37 crore recently as the first installment of the total Rs 267 crore held by the government,? company sources told FE.
After this, the company has to bring in only Rs 68 crore to become a majority shareholder. It has a paid-up capital of Rs 393 crore, while its authorised share capital is Rs 500 crore. Kribhco can mobilise funds through co-operatives to repatriate government equity at face value as per the Multi-State Cooperative Societies Act of 2002.
The MSC Act of 2002 allows multi-state cooperatives?19 such societies are in operation?to amend their byelaws to repatriate and redeem equity at par. While Kribhco?s peer Iffco repatriated the government?s entire equity of Rs 290 crore at par by 2004, Kribhco could only reduce the Centre?s equity from Rs 328 crore to Rs 270 crore by the time the UPA came to power in May 2004.
Kribhco was forced to move the high court in 2006 after the fertiliser ministry got a presidential directive issued to the cooperative to stop the repatriation process saying that the government should be fairly compensated for its equity in the cooperatives.
The HC held that the government cannot treat Kribhco and Iffco differently, especially since the government nominee on both co-operatives? boards didn?t object to the changes.
Despite the high court?s green signal, the fertiliser ministry is persisting with its stand. A senior official said, ?The government should get a due share of the wealth this company has created. The firms should not be allowed to take unilateral decisions on the repatriation of equity.?
But a senior official in the agriculture ministry told FE that the process of repatriation of the remaining government equity will begin soon. However, it is likely to be a slow process.
The government has already allowed the cooperative to reduce the face value of its share from Rs 20,000 to Rs 10,000 per share and also to convert 500 shares of face value of Rs 1 lakh per share into 5,000 shares of face value of Rs 10,000 a share, as direct transfer of shares to society is not allowed under the MSCS Act.
Kribhco is a debt-free entity with reserves of Rs 2,200 crore. It earned a profit of Rs 209.20 crore in 2007-08. It has a total capacity of 36 lakh tonnes with a utilisation ratio of 101%. Kribhco is India?s second largest urea maker after Iffco and its 2007-08 sales were 7.5% of total consumption.