A bitter pill for sick fertilizer giant

In response to a report in The Times of India, “A bitter pill for sick fertilizer giant,” Mar. 6, 2016.

The handling of the Fertilizer and Chemicals Travancore Ltd. (FACT) illustrates the Kerala government’s lack of basic understanding how finance need to be used for an industrial enterprise.

The whole hoopla was focused on getting a loan to keep the operations going. With the current loan, the can has been kicked down the road. There was not even a whiff of discussion about the reasons why things reached such a pathetic state.

“The loan is not a viable option, but we didn’t have an alternative. Currently, the company doesn’t have even the working capital and hence this loan is of critical help,” said K Radhakrishan, general secretary, FACT Officers’ Federation.

The only way an industrial enterprise can operate is if it can generate a surplus from its operations after covering its expenses and costs. Depending on government patronage, by virtue of being a government owned enterprise, can only go so far — especially when the Kerala government itself is running chronic budget deficits of Greek proportions.

All the discussions and news have centered on the loan, as if finances will solve the management and operating deficiencies. There has been no discussion about underlying causes and solutions to the problems to run the factory efficiently. Clearly, the operating expenses for FACT are greater than its revenue. So the drama will be repeated again sometime in the future.

The related report, “Cabinet clearance for FACT to sell 170 acres to BPCL,” [2] points to the bureaucratic fiefdom run by the Kerala government. Why should the state government cabinet of ministers have to make any operating decision about FACT? It demonstrates the utter lack of autonomy for FACT management.

If Kerala government enterprises are to be viable and successful they need autonomy, and necessary management skills and operations expertise. Without these minimum requirements, all the news-making about loans and finances are a smoke screen to cover-up widespread ineptitude in the Kerala government, its enterprises and agencies.

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Author: Kerala Insider

Topics and issues related to Kerala economic development challenges.