Zuari Agro shuts down production, ops since 1 month
16th October 2019, 03:03 Hrs
Zuari Agro Chemicals Limited (ZACL), one of the oldest and biggest factories in the State, has totally shut down production and operations since the last one month.
While the company hopes to resume operations by the month end, the total shutdown has caused uncertainty and anxious moments to about 1500 permanent and contract employees at ZACL.
ZACL Chief Operating Officer Nitin Kantak confirmed to The Goan that the plant had stopped all production at the factory.
“Our urea plant has been closed since the last three months, while the NPK plant which was running till a few months ago, has also been stopped since the last month,” said Kantak.
When asked for reasons for the total shutdown at one of Goa’s biggest factories, Kantak said there were a number of factors.
“The main factor pertained to financial issues. Last year in particular was a bad year for us with high raw material cost, because import prices went up and the dollar shot up from Rs 63 to Rs 74 and all our raw materials are usually imported.”
“In addition, there was a drought in Maharashtra, which is our major market. As a result, sales dropped considerably and both these reasons put together left the company with severe financial issues.”
“To compound this situation, the subsidy that we get was unduly delayed because of elections. Normally, the budget is decided and approved in March and by April, disbursement starts to the fertiliser industry. But this time because of elections it was postponed and the actual budget approval happened only in July end.”
Kantak also stated that disbursement of incentives had been very slow from the government side.
“Because of this, we went through devolvement wherein interest on loans taken by the company could not be paid on time and our ratings degraded. Because our ratings went down, banks tightened to give loans on fresh material and we are affected with funding to buy raw materials and we had to totally stop production,” Kantak said.
The ZACL COO explained that the main raw material ingredient, phosphoric acid, comes from Morocco, while liquid ammonia comes from Qatar via ships in the Mormugao port.
“The dollar rise cost us dear. The increased input price cannot be recovered from the market and MRP will have to be increased significantly and even the subsidy that we receive from the government is fixed in nature.”
“Earning contribution from the end product came down. Subsidy delay, dollar price rise, market conditions and increased raw material and input price caused us financial issues,” Kantak told The Goan.
“Because of the current environment, where so many frauds take place, banks have become very defensive and are very conservative in issuing loans and put too many conditions.”
“That is another factor and a few years ago, banks would have given loans and this situation would not have arisen and affected plant operations.”
The ZACL official said efforts are underway to try and work out with banks on how to restart the plant soon.
“We are hopeful that we can start production very soon, even by this month end. Expansion plans have been kept on hold for now, but it will surely happen later and we are hopeful that the plant will resume operations soon,” said Kantak.