Petrofils at standstill

That is just the tip of its financial woes: Petrofils owes more than Rs 17 crores to the Gujarat Electricity Board and the Gujarat Industries Power Corporation Limited, which invited the power disconnection threat. The threat was eventually what compelled the cooperative to stop production, officers said.

While Petrofils has acquired a High Court stay order against disconnection till December 8212; the hearing of the case is scheduled on Tuesday 8212; officers said the cooperative required at least Rs 2 crore to start production of synthetic yarn. Over the past several years, its debt has touched Rs 450 crore and the company is unable to break even.

8220;Steep increase in excise duty, liberal and cheaper imports, increase in cost of raw materials but no corresponding increase in price of yarns and restraints from mobilising equity from capital market as Petrofils is governed by the Multi-State Co-operative Societies Act, 1984,8221; are some of the reasons cited in an official note on the decline in performance.

Set up in 1974 to safeguard weavers8217; interests, Petrofils 8220;sustained good operations till 1990-918221;. Officers said the liberalisation policy, coupled with the entry of private companies like Reliance and Indo-Rama into the field in the late 1980s-early 1990s, had dealt Petrofils a severe blow. While Petrofils could manufacture 7,000 metric tonnes of polyester filament yarn per annum, Reliance produced 20,000 MTA.

8220;The balance tilted from more demand and less supply to less demand and more supply. The yarn prices kept changing, in which private companies had a major say8221;, officers said, adding that 50-odd units all over the country were facing the same problem.

Tough competition necessitated expansion, for which the cooperative borrowed Rs 250 crore from various institutions. Teetering on the verge of closure in 1996, Petrofils decided to switch from purchasing raw material directly and converting it into yarn to making yarn from raw material provided by customers. This decision led to the loss of Rs 2 crore per month, said officers.

Said a former senior officer of the cooperative, 8220;The Government is yet to decide on a revival package Petrofils submitted in the mid-1990s, which suggested amending the Act to allow the company to raise equity from the market.8221; A few years ago, the package would have cost material provided by customers. This decision led to the loss of Rs 2 crore per month, said officers.

Said a former senior officer of the cooperative, 8220;The Government is yet to decide on a revival package Petrofils submitted in the mid-1990s, which suggested amending the Act to allow the company to raise equity from the market.8221; A few years ago, the package would have cost Rs 50 crore; now it would cost more than Rs 200 crores, sources said.

A crucial Petrofils Board meeting is scheduled to be held in New Delhi on December 17, which will discuss a Crisil Advisory Services report, which suggests, among other things, closing down the Vadodara plant and operating only the one in Bharuch, pouring in Rs 500 crore to revive Petrofils and closing down the cooperative completely after introducing a voluntary retirement scheme.

Asked about the decline in performance, Director Finance Shital Vohra told Express Newsline that a clearer picture would emerge after the meeting.