The Fertiliser Ministry is considering the waiver of Rs 550 crore worth of government loans and accrued interest owed by Madras Fertilisers Ltd (MFL) with the objective of reviving the sick PSU.
“As part of the financial restructuring plan, we have proposed writing off of the existing government loan worth Rs 390 crore given to MFL as on March, 2010, and also waiver around Rs 160 crore interest accrued on it,” a senior Fertiliser Ministry official told PTI.
The waiver of loan will help the company restart operations with a clean balance sheet and without any loan overdue. It will also help Chennai-based MFL access banks to raise the resources necessary to improve the performance of its units, the official said.
The proposed revival plan for public sector undertaking MFL has been circulated for comments among the concerned ministries. The final report will be vetted by the Board for Reconstruction of Public Sector Enterprises (BRPSE) before it is placed for the Cabinet decision.
Madras Fertilisers Ltd had suffered huge losses since 2003-04, largely due to introduction of the New Pricing Scheme (NPS) for urea by the government, which did not compensate it for the cost of a revamp undertaken in the 1993-98 period, the official added.
“Later, the compensation received by MFL for urea was not sufficient to service the loan, interest, depreciation, loan repayment and to source the raw materials,” the official said.
According to the Fertiliser Ministry official: “If the proposed strategy is not approved by the Cabinet, the company will make further unsustainable losses and the unit has to be closed. The cost of closure will also be high.”
The official also explained the country presently imports a large quantity of urea. “Production from MFL units will reduce subsidy and foreign exchange outgo,” he said.
As MFL units are strategically located in Tamil Nadu, which is a deficit zone in fertiliser production, the revival of these units will enhance availability of fertilisers in the southern region. MFL produced 4.36 lakh tonnes of urea in 2009-10.