Crisis ends as FACT to give KRL post-dated cheques for Rs 101 cr

Jays Jacob
15 May 2003

Kochi: The three-month-long crisis at Fertilisers and Chemicals Travancore (FACT) has been resolved with the public sector fertiliser company agreeing to hand over post-dated cheques for Rs 101 crore to Kochi Refineries (KRL), enabling the latter to resume the supply of raw materials.

FACT''s plants at Udyogamandal and Cochin Divisions, which were closed since 20 February 2003 following a financial crunch, will be restarted within one or two days. "Everything depends on how soon KRL resumes the supply of naphtha and other feedstock to FACT," says an official who attended a high-level meeting between FACT and KRL.

KRL had stopped the supply of naphtha, benzene and furnace oil to FACT after the latter failed to pay the outstanding dues amounting to about Rs 100 crore. As per the agreement, FACT will pay the outstanding dues as post-dated cheques, to be encashed in five equal instalments from July 2003. The cheques are to be encashed in every 15 days from July, say sources.

All future payments for raw materials supplied by KRL will also be made through post-dated cheques, the sources add. "FACT had contented that it should be allowed to pay the bills as post-dated cheques, considering that the company too receives payments for the sale of fertilisers as post-dated cheques. With KRL agreeing to the requests, a settlement was reached."

The sources say FACT''s ammonia plant at Udyogamandal will be started first, followed by the other plants. The period of shutdown was also utilised by FACT to conduct its annual maintenance work.

With the prices of raw materials and fuels supplied by KRL easing, the total financial outgo will also be far lesser than during February 2003. For instance, at the time of the shutdown, the prices of naphtha, the main raw material for FACT, was ruling at Rs 18,000 per tonne. This has declined to Rs 12,000 per tonne levels. Similarly, benzene at Rs 20,000 per tonne compared to Rs 36,000 per tonne and furnace oil Rs 10,000 per tonne as against Rs 14,000 per tonne are far more comfortable now.