FACT, once the pioneer chemical industry in so-uthern India is on the decline for over a decade. Amidst large scale deficits in domestic production and surging imports of fertilizer materials at exorbitantly high costs, established producers like FACT are struggling to exist.
In the last 12 years of experimenting in FACT, we have come to a point that old business model and tools of restructure don’t work at all. Still, many of us think that FACT has a strong relevance in the contemporary Indian situation.
The point, however, is how to focus on improving revenues, optimize costs, maximize resource utilization and at the same time effectively manage the associated business risks. The situation appears more grim as there exist only a limited scope for product or processing innovations in the fertilizer business and that we have to offer existing services to existing customers using existing technologies.
In FACT, unfriendly national policies and inadequate vision of future led to the present disastrous situation. It reminds us the entire situation in late 1960s. FACT was ailing under very low-level capacity utilization of its plants, technical snags, obsolete technology and small capacity plants.
It was the late MKK Nair’s vision that changed the course of events. The proposal to set up the Cochin plant to produce urea using naphtha from the adjoining Cochin Refineries (which was commissioned in 1969) at Ambalamughal as feedstock changed the outlook of FACT and paved way for the urea industry in the south.
As many as 30 years later, the feedstock naphtha came under severe pressure and its cost increased several folds. Naphtha based urea plants became unviable under the prevalent fertilizer policy, feedstock cost and plant efficiencies. Natural gas was taking over as a cheap environment friendly and efficient feedstock for urea. An LNG terminal was proposed for Cochin way back in 1998.
Crisis Aggravated
In 2009, the company was facing a severe crisis in the wake of an unprecedented increase in the price of raw material in the international market. The whole of production remained suspended for months. Consequent to the demand push, the price of sulphur which hovered around $ 80 increased to an unprecedented $690 per tonne.
The issues being confronted by FACT needs consideration in a more elevated plane considering the realities of the current mode of industrial development, fertilizer and food security. Easy availability of industrial raw material such as sulphur and phosphate rock cannot be assured as global demand for these items are increasing and also due to the fact that countries possessing these minerals are undertaking further value addition efforts for better export realization.
(M P Sukumaran Nair was the special secretary to Chief Minister of Kerala. He was also the chairman, Chemical Engineering Board of the Institution of Engineers (India) and managing director of Travancore-Cochin Chemicals Ltd)