Lok Sabha Question No. 1105 (UNSTARRED), answered on 2018-07-24
Subject: Sick PSUs
Ministry: CHEMICALS AND FERTILIZERS
Asked by: SRIRAM MALYADRI

## GOVERNMENT OF INDIA MINISTRY OF CHEMICALS & FERTILIZERS DEPARTMENT OF FERTILIZERS

## LOK SABHA

## UNSTARRED QUESTION NO. 1105 TO BE ANSWERED ON: 24.07.2018

## Sick PSUs

## 1105  SHRI MALYADRI SRIRAM:

Will the Minister of CHEMICALS AND FERTILIZERS be pleased to state?

- (a) whether  the Government  is  aware  that inability  of  the  management, cumulative  adverse  impact  of  the  uneconomic  capacity,  high  manpower cost,  high  finance  cost,  severe  international  competition,  low  technology, financial  conditions  are  responsible  for  the  sickness  of  PSUs  under  the Ministry and if so, the details thereof;
- (b) whether the Government has formed any committee, if so, the details thereof along with its recommendations to save the sick PSUs;
- (c) if  not,  the  reason  therefor  alongwith  the  steps  taken/being  taken  by  the Government in regard?

## ANSWER

MINISTER  OF  STATE  (INDEPENDENT  CHARGE)  OF  THE  MINISTRY  OF PLANNING  &  MINISTER  OF  STATE  IN  THE  MINISTRY  OF  CHEMICAL  AND FERILIZER.

(RAO INDERJIT SINGH)

- (a): There  are  total  18  PSUs  functioning  under  the  control  of  the  Ministry  of Chemicals and Fertilizers.  Out of which, 8 PSUs are sick and loss making. Major reasons for sickness of these sick PSUs are as under:
- (i) Madras  Fertilizers  Ltd  (MFL) :  MFL  was  beset  with  problem  of  higher depreciation and interest costs on the investments made during revamping of  its  plants  during  the  year  1993-98.  Apart  from  this,  Policy  anomalies & dependency  of  high  cost  Naphtha  had  negative  impact  on  the  financial performance of the company.
- (ii) The  Fertilizers  &  Chemicals  Travancore  Ltd  (FACT) :    FACT  had been consistently earning profits from 1983-84 to 1997-98. The financial performance  of  FACT  turned  negative  from  the  year  1998-99,  due  to reasons  such  as  dependency  on  high  cost  Naphtha,  policy  anomalies, reduction  in  capacities  &  stoppage  of  Urea  plant  and  Caprolactam  plant. Setting up of Ammonia plant based on a Public Interest Litigation restricting usage of storage facilities at Cochin Port for import of Ammonia was also a major  reason  for  the  sickness  of  the  company.  Losses  due  to  the  above

reasons  led  to high interest / financial  charges  and  working  capital constraints,  leading  to  underutilization  of  existing  capacities  and  further losses eroding the Networth.

- (iii) Hindustan  Organic  Chemicals  Ltd  (HOCL): Reasons for  poor  financial condition of HOCL over the years since 1997-98, when the company made losses for the first time, are cumulative adverse impact of the uneconomic capacity of its plants (designed during pre-1991 licensing period as part of Government  policy  to  manufacture  chemicals  for  domestic  demand  only and as import substitute to save foreign exchange), high manpower cost, high  finance  cost,  severe  international  competition  along  with  gradual reduction  in  tariff  barriers  since1991  making  it  difficult  to  compete  in  the global  scenario,  low  technology,  high  investment  in  some  projects  which became unviable after economic liberalization and high power cost coupled with high cost of feedstock.
- (iv) Hindustan Fluorocarbons Ltd (HFL): The company's plant was set up in 1987  at  a  relatively  high  cost  mainly  on  account  of  increase  in  cost  of imported  equipment  due  to  exchange  rate  fluctuations  and  time  over  run leading to higher pre-operative expenses. The company's performance has been adversely affected by uneconomical plant size and energy intensive technology,  high  manpower  cost,  low  sales  realization,  high  raw  material cost, high interest and depreciation burden.
- (v) to (viii) Rajasthan Drugs & Pharmaceuticals Limited (RDPL), Hindustan Antibiotics Limited ( HAL), Bengal Chemicals & Pharmaceuticals Limited (BCPL) and Indian Drugs & Pharmaceuticals Limited ( IDPL): Reasons for sickness of 4 (four) Pharmaceuticals PSUs are inability of the management, cumulative adverse impact of the uneconomic capacity,  high  manpower  cost,  high  finance  cost,  severe  international competition, low technology, financial conditions.
- (b)  &  (c):  The  steps  taken/being  taken  by  the  Government  for  revival/  closure  of these PSUs are as under:

## (i) Madras Fertilizers Ltd (MFL) :

In  terms  of  DPE  guidelines  on  streamlining  the mechanism for  revival  and restructuring of sick Central  Public  Sector  Enterprises,  MFL  engaged Projects  &  Development  India  Ltd  (PDIL)  as  an  expert  agency.  MFL  had derived  &  submitted  a  revival  proposal  based  on  PDIL's  report.  The  draft proposal  was  circulated  for  Inter-Ministerial  consultation.  Based  on  the comments  received  from  stake  holder  the  draft  proposal  is  under  reexamination.  Consent  of  Government  of  Tamil  Nadu  to  grant  NOC  for monetization of the surplus land of MFL has also been sought.

## (ii) The Fertilizers & Chemicals Travancore Ltd (FACT) :

FACT approached with a proposal which includes waiver of outstanding loan & interest thereon, one-time compensation for the use of high cost LNG & approval for sale of land. Proposal for financial restructuring of FACT was circulated  for  Inter-Ministerial  consultation.  Meanwhile,  a  presentation  was held in Prime Minister Office to discuss the various scenarios with regard to financial  restructuring  of  FACT.  However,  based  on  the  comments  from stake holder Ministries & discussion held in PMO, the draft proposal is under re-examination.

## (iii) Hindustan Organic Chemicals Ltd (HOCL):

HOCL has two units located at Rasayani, Maharashtra and Kochi, Kerala. The Government of India on 17.05.2017 has approved a restructuring plan for the company which involves closing down operations of all the plants at Rasayani  unit  except  Di-Nitrogen  Tetroxide  (N2O4)  plant  which  is  to  be transferred to ISRO on 'as is where is' basis, with about 20 acres of land and employees  associated with the plant. While Kochi unit will continue operations,  'in  principle'  approval  has  also  been  accorded  for  HOCL  to  be put  up  for  strategic  disinvestment  through  DIPAM  after  the  process  of disposing  land  and  other  unencumbered  assets at  Rasayani  is  completed. Financial  implication  of  the  restructuring  plan  is  Rs.1008.67  crore  (cash) which is to be met partly from sale of 442 acres HOCL land at Rasayani to Bharat  Petroleum  Corporation  Ltd.  (Rs.618.80  crore)  and  the  balance through bridge loan from the Govt. The funds are to be used to liquidate the various  liabilities  of  the  company,  including  separation  of  employees  of Rasayani  unit through VRS/VSS,  payment  of  outstanding  salary  and statutory  dues  of  employees  and  repayment of Govt. guaranteed bonds of Rs.250 crores.

## (iv)   Hindustan Fluorocarbons Ltd (HFL):

In  respect  of  HFL,  the  Government  of  India  on  27.10.2016  has  given  'in principle' approval for strategic disinvestment of the company with the parent company HOCL to exit the firm completely. The strategic disinvestment is to be processed in accordance with the guidelines / instructions issued by the Department of Investment and Public Asset Management (DIPAM) from time to time.

## (v) to (viii)   Rajasthan Drugs & Pharmaceuticals Limited (RDPL), Hindustan Antibiotics Limited ( HAL), Bengal Chemicals & Pharmaceuticals Limited (BCPL) and Indian Drugs & Pharmaceuticals Limited ( IDPL):

In  pursuance  of  directions  of  the  Cabinet,  a  Committee  of  three  Ministers (Minister of Chemicals & Fertilizers, Minister of Road, Transport & Shipping and Minister of Finance) considered the future course of action in respect of Pharma PSUs and noted that all Pharmaceuticals PSUs, except Karnataka Antibiotics  &  Pharmaceuticals  Ltd  (KAPL)  were  sick  or  incipient  sick  and their  earlier  revival/  rehabilitation  packages  had  failed  to  achieve  desired results. The Committee recommended to close Indian drugs & Pharmaceuticals  Ltd  (IDPL)  &  Rajasthan  Drugs  &  Pharmaceuticals  Ltd (RDPL)  and  strategic  sale  of  Bengal  Chemicals  &  Pharmaceuticals  Ltd (BCPL) and Hindustan antibiotics Ltd (HAL) after meeting their liabilities from sale of their surplus land to the Government agencies. The Government has accepted the recommendations of the Committee.

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