KOCHI: India is all set for rapid industrialisation and economic development. However, in Kerala, not only are new industries not coming up, some erstwhile companies have wound up operations are in the process of winding up. Coats India Ltd., Toshiba Batteries, Indian Aluminium Company, Travancore Rayons, Premier Cables, HOC-Ambalamugal and FACT are some of the Industries that have come under the above categories.
Environmentalists and ecologists are blocking new projects such as ones which are needed to produce electric power, which is very essential for industrial development. Owing to this attitude, there is industrial stagnation in the state of Kerala.
Reasons for the Current Situation
The quality of the managers in FACT is no way inferior to their counterparts in other undertakings. However, the quality of the managements differ.
Unprecedented increase in the prices of raw materials like Naphtha, Benzene, sulphur etc., uneconomic size of some of the plants, obsolete technologies employed and frequent technical snags in some of the plants, availability of imported fertilizers at a lower price, discontented employees, unfavourable industrial relations, inadequate vision of the management and callous approach to the issues on FACT by successive Union and state governments.
How to Bail Out FACT?
Political bosses have been speaking about a revival package of `990 crores for FACT. The question is: Could all the issues led FACT to the present situation be resolved with this financial package? Definitely, the financial package could be a temporary relief to the hard-pressed employees, but it alone won’t be sufficient to bring FACT back on rails.
The other alternative is a suggestion based on two incidents which took place in the petroleum sector in the recent past. Cochin Refineries Ltd and Balmier-Lawrie Ltd have jointly formed a company. The joint venture-CRBL-set up adjoining CRL produced propylene. The main user of proplyene was HOC, Ambalamugal, adjoining CRL and CRBL. The joint venture operated succesfully for few years. However, when proplylene was available at a lower price from other sources, HOC stopped taking supplies from CRBL. Finally, CRL bought the shares of BL in CRBL and CRBL plant became part of CRL. After the acquisition there was no payment of duties and taxes for the transfer of LPG for making proplylene. Ultimately CRL could supply proplylene to HOC at a lower price than the proplylene from other sources. The second incident was that of the Union Government’s share in Kochi Refineries Ltd-earlier CRL. KRL was mainly a refining company and its products were marketed by PSU Oil-marketing companies, IOC, BPCL and HPCL. The union government apprehended that consequent to the liberalisation of Petroleum sector KRL would suffer to market its products. Old KRL is now a unit of BPCL as ‘BPCL-Kochi Refinery Unit’. The change is working well.
In view of the above two successful formations, it is suggested that the Union government’s shares in FACT be sold to BPCL making FACT to become another unit of BPCL.
Justifications for the Acquisition of FACT by BPCL
Presently, FACT takes feed stocks like Naptha, Benzene, Furnace Oil from BPCL-Kochi Refinery. Pipeline linkages exists between the companies. When Kochi Refinery commissions the ongoing expansion facilities, FACT’s complete requirement of sulphur could also be met from the Refinery. All supplies from Refinery to make Fertilisers would not attract duties and taxes after acquisition. It will help to produce fertilisers/chemicals at lower costs.
Kochi Refinery needs hydrochloric acid, caustic soda, nitrogen, hydrogen etc for the refining processes. These materials are available at FACT. After the proposed acquisition, refinery would get these materials without duties and taxes.
Utilising the country-wide marketing infrastructure of BPCL, the marketing and trading operations in fertilizers and chemicals could be strengthened.
FACT has a lot of unutilised land, which could be used for the expansion of Kochi Refinery. The refinery needs lot of land for their ongoing expansion project costing `16000 crores. As part of the expansion, the Refinery is setting up petrochemical units also.
A detailed study would identify more assets with FACT and BPCL which could be used more productively. There is a say in management that two plus two is not four, but five. This is very true in the state if the resources-men, material and money are rightly used.
Since HOC, Ambalamugal unit, is also in doldrums and HOC is taking its raw materials from BPCL,-Kochi refinery, the possibility of handing over this unit to BPCL could also be considered.
Conclusion
It is suggested that Ministry of Chemicals and Fertilizers and Ministry of Petroleum and Natural Gas could jointly do the needful to conduct a feasibility study on the proposal at the earliest.
( The author is a former functional director of KRL, Kochi)