DIRECTORS' REPORT The Shareholders Madras Fertilizers Limited Your Directors have pleasure in presenting herewith the 49th Annual Report together with the Balance Sheet as on March 31, 2015 and the Profit & Loss Statement for the year 2014-15. SICKNESS AND REVIVAL As mentioned in the earlier Annual Reports, the main reasons for the continuous losses and consequent sickness was due to cost and time overrun of revamp of Ammonia and Urea Plants, delay in stabilization of revamped Plants due to Technology related issues, higher energy, poor reliability, lack of maintenance of the existing Plant for want of funds and unfavorable Pricing policies up to March 2009. The Company's operation became profitable, thereafter, due to amendments in policies and improvement in production performance. The Company shall come out of sickness, once the draft rehabilitation scheme (DRS) is approved by DoF & BIFR and the same is implemented. DIVIDEND The Company does not propose to declare any Dividend to shareholders during the Fiscal 2015, as per the Companies (Declaration and Payment of Dividend) Rules, 2014, due to huge accumulated losses (Rs. 517.14 Cr) and negative net worth (Rs. 342.61 Cr) as on March 31, 2015. PLANT PERFORMANCE During 2014-15, Urea production was 328900 MT (67.6% capacity) with an annual specific energy consumption of 8.086 Gcal/MT. Main reason for the lower production and a higher energy consumption is as follows. 1. CPCL Hydrogen limitation and initial technical problem while restarting the Plant during April 2014. 2. From October 8th 2014 to January 14th 2015 plants were shut down due to GoI policy. During the year, GOI vide notification dated Apr 02, 2014 has directed to close down the Naphtha based Ammonia, Urea Plants from Jul 01, 2014. However, vide notification dated Sep 03, 2014 the units were permitted to run up to September 30, 2014. Subsequently, GOI vide notification dated Jan 07, 2015 permitted to run Naphtha based Ammonia-Urea Plants for 100 days from the date of notification and hence in MFL Ammonia-Urea Plants, after shutdown for 3 months during Oct to Dec 2014, production was resumed during Jan 2015 and Urea Plant was run upto Apr 16, 2015. With respect to Complex Fertilizers, MFL produced 0.74 lac MT of NPK 17:17:17 during 2014-15. Ammonia was procured from RCF for sustaining NPK Production the quantity procured was 1767.59MT. GAS CONVERSION MFL Ammonia Plant is gas compatible with minor modifications in the Front End of the Ammonia Plant and the Basic Engineering Design Package has already been completed by M/s Haldor Topsoe A/S (HTAS), Denmark, MFL Ammonia Plant Process Licensor. The detailed engineering is being carried out by M/s Projects & Development India Ltd. (PDIL) and is in the advanced stage of completion. Tenders for the major equipment viz., NG Fired Heater, Primary Reformer Burners, NG Preheat Coil, NG fuel preheater, Pipings & other instrument items were floated and under technical evaluation by M/s PDIL and as per PDIL, the project is expected to be completed by 2015. In the meantime, MFL is exploring all the possibilities of sourcing Natural gas either from IOCL from their proposed Ennore LNG Terminal, which would become operational by the year 2018 or from GAIL through KKMBPL (Kochi-Koottanad-Mangalore-Bangalore pipeline) thru a spur line from Krishnagiri. As per GAIL, this project is likely to be implemented by the year 2017-18. As per MFL's Board direction, Heads of Agreement (HoA) was signed with IOCL on September 17, 2013, for supply of Gas to MFL. In the meantime, action has also been initiated to procure RLNG from M/s.LNG Bharat Pvt Ltd, through Cryogenic Road Tankers from its proposed RLNG terminal at Krishnapatnam Port which is 150 Km from MFL Plant. MARKETING PERFORMANCE Fertilizer Sales Shutdown of Urea Plant for 3 month period due to GOI policy has resulted into lower production and hence during the year, Company has sold 4.01 lakh MT of fertilizers as compared to 5.45 lakh MT of previous year. The seasonal condition by and large in south India was satisfactory except in Andhra Pradesh and Telangana States wherein the rainfall was around 65% only. The market share of MFL urea was 5.71% in south India during 2014 - 15. GOI, in order to optimise Nitrogen use efficiency, is promoting production of Neem Coated Urea for slow release of Nitrogen in the soil. There was a cap of 35% of production capacity for Neem Coated Urea so far and during Jan 2015 the GOI announced removal of the cap and 75% production capacity to produce Neem Coated Urea is made mandatory. During the year, MFL commenced production of Neem Coated Urea and sold 967 MT in the market and production of this value added urea would be enhanced in the coming years per GOI directives for optimising urea application with a vision to increase food grains productivity towards achieving food security. Efforts for streamlining logistics operations on cost effective basis continued this year also and 89% of the products were directly delivered to the dealers. Cash sales through RTGS payment accounted for 94.5% of total sales and 99% of the cheques got realised within seven days. There has not been a single case of Bad Debt for this year also. Agrochemicals, Bio-fertilizers & Organic Manure Rs. 197.37 lakh of Eco - friendly Neem based agrochemical was traded during the year as against Rs. 194.47 lakh for previous year. The Company has sold 349 MT of Biofertilizers during the year as against 147 MT for the previous year. There was an increase of 137% sales against previous year. Under Basket Approach, the Company has also sold 5432 MT of Organic Manure during the year in Tamil Nadu, Pondicherry, Karnataka, Andhra Pradesh and Kerala States against 8,898 MT sold during last year. The short fall in sales was due to the repeated purchases from farmers were not forthcoming since this eco - friendly product is recently introduced to enrich soil fertility and awareness has been picking up in slow phase. Intense promotional programmes are planned in the coming years to promote eco - friendly products like Organic Manure, City compost, Neem Pesticides, etc., in a larger way to develop and sustain the eco - friendly agriculture environment. MARKET DEVELOPMENT & AGRO-SERVICE PROGRAMS MFL's Marketing personnel have contacted 33602 farmers during the year and educated them about the package and practices of cultivation of major crops, soil health techniques and optimum usage of chemical fertilizers, bio-fertilizers and Neem products to enhance soil fertility and food grains productivity for consequent growth in economy. Under corporate social responsibility to farming community, the Marketing personnel had collected 5658 Soil samples, analysed and communicated the micro & macro nutrient recommendations of various crops to farmers during the year. PUBLIC DEPOSIT There are no Public Deposits with the Company. ISO 9001 / 14001 CMD has approved the annual Quality / Environment objectives for all the functional areas and the same has been communicated to the respective functional area for compliance during the year 2014-15 MFL has obtained EMS (ISO 14001:2004) Renewal Certification for three years effective Jun 1, 2014 upto May 31, 2017 from M/s Indian Register Quality Systems (IRQS), our certifying body 1st surveillance Audit for QMS (ISO 9001:2008) has been conducted by IRQS on 30th October 2014 at Head office Manali and October 28, 2014 at Vellore and Bangalore regional offices. Internal Audit on QMS and EMS was conducted during Feb - 2015 which was essential for conducting the Surveillance Audit which took place during first week of April - 2015. MEMORANDUM OF UNDERSTANDING The Company entered into MOU with Department of Fertilizers (DOF), Government of India for the year 2015-16 on March 30, 2015 setting up targets for performance of the Company in terms of static and dynamic parameters. ACTIVITIES AND ACHIEVEMENTS OF VIGILANCE DEPARTMENT DURING 2014-15 • Complaints received were attended and reports submitted as per Complaints Handling Policy of the Company / Central Vigilance Commission (CVC) guidelines. • Continuously monitoring the progress of Disciplinary Proceedings in respect of vigilance cases for timely completion. • Agreed List of Suspected Officers and List of Officers of Doubtful Integrity were finalised and sent to DoF. • Annual Property Returns of Officers were scrutinized as per CVC guidelines. • Rotation of Officers in sensitive posts effected as per CVC guidelines. • Vigilance activities for the year 2014-15 were reviewed by the Board of Directors in the 276th Meeting held on Nov. 11, 2014. • As per the Central Vigilance Commission's requirement, CVO had one Structured Meeting with the CMD, MFL on July 1, 2014 at MFL Chennai, and pending issues were discussed threadbare and suggestions given to the Management. • For easy reference, CVC Guidelines / Circulars on Tenders are made available in MFL's Online Integrated System (OLIS). • CVC guidelines on Tenders and disciplinary proceedings and other matters as and when received were communicated to Management for necessary action. • Tenders with estimated value more than Rs.2 lacs are being published in Central Public Procurement Portal (CPPP). • For all Tenders with value more than Rs.5 lacs, e-Tendering method is being followed. • Vigilance Awareness Week (VAW) 2014 was observed between Oct 27, 2014 and Nov 1, 2014 as advised by CVC. The following are the highlights: 1. CMD administered Vigilance Awareness Pledge on October 27, 2014 at 11 a.m. to mark the commencement of VAW 2014. 2. On Oct 28, 2014, a Guest Lecture was organised on the topic 'Dharma and Vigilance' which was delivered by Shri C L Ramakrishnan, retired IPS Officer. 3. Slogan contest in English, Hindi and Tamil on Greed and Corruption was organised in which MFL employees participated. 4. Similarly, an Essay Competition on the theme "Combating Corruption - Technology as an Enabler" was organised for MFL employees as well as for the Students of two neighbouring schools. 5. I n a function held on Nov 26, 2014, CMD presented Prizes and Certificates to the Winners of the Slogan / Essay competitions held in connection with VAW 2014 observed from Oct 27 - Nov 1, 2014. HUMAN RELATIONS AND INDUSTRIAL RELATIONS MANPOWER & TRAINING The total strength of MFL as on 31.03.2015 is 693 as against 734 as on 31.03.2014. 436 employees have been trained during the period Apr 2014 - Mar 2015 on Technical, Soft and Life skills for the enduring benefit and development of the Organisation. INDUSTRIAL RELATIONS During the year, the overall Industrial Relation situation in the Company has been normal and cordial. OFFICIAL LANGUAGE IMPLEMENTATION MFL has been continuously exceeding the target fixed by Department of Official Language for letter correspondence in Hindi and other implementation programs. Hindi Fortnight was celebrated at Head Office and Regional Offices. Various competitions were organized and prizes were distributed. SC / ST WELFARE ACTIVITIES The Presidential Directives and various guidelines issued by the Government of India from time to time relating to the welfare of SC / ST employees are being scrupulously followed. A Liaison Officer for SC / ST at DGM level ensures implementation of Government Directives. MFL is constantly reviewing the vacancies reserved for SC / ST and is taking concerted efforts to fill up those vacancies. Lumpsum contribution of Rs. 30000/- per year for celebration of Dr. Ambedkar's Jayanthi was sanctioned. Two computers were provided to Thiruvottiyur Municipality High School and three computers to Panchayat Union Primary School where downtrodden community students are studying. CORPORATE SOCIAL RESPONSIBILITY (CSR) Pursuant to Section 135 of the Companies Act, 2013 read with the Companies (Corporate and Social Responsibility Policy) Rules, 2014 your Company has updated the CSR Policy which was already approved by the Board at the Board meeting held on 05.11.2013. As a part of the CSR initiatives, your Company during the financial year 2014-15 has among the other initiatives, undertaken the following projects: Construction of Toilet in Panchayat Union Primary School (PUPS), Ariyalur, Puzhal Block, Thiruvallur District, Tamil Nadu, at an estimated cost of Rs. 2.5 lacs is under progress. Regular supply of potable water through pipelines from MFL to Harikrishnapuram (Manali), a neighbourhood village (around 500 families) is ensured. INVESTOR RELATIONS CELL (IRC) IRC is functioning in the Company under the Chief Financial Officer (General Manager-F&A) & Company Secretary with members from various Groups to create awareness of the Company's strength and ensuring timely communication to shareholders. DIRECTORS Government of India have appointed Shri Heera Lal Samariya, IAS, Under Secretary, Department of Fertilizers, as GOI Nominee Director in MFL Board in place of Shri K M Gupta, IES, effective April 27, 2015. The Board placed on record the valuable and outstanding contribution made by the outgoing Director Shri K M Gupta, IES during his tenure as Director on the Board for the substantial and sustainable development of the Company. AUDITORS The Comptroller & Auditor General of India have appointed M/s B Thiagarajan & Co, Chartered Accountants, Chennai as Statutory Auditors of the Company for the year 2014-15. STATUTORY INFORMATION Particulars of Employees and Related Disclosures In terms of the provisions of Section 197 (12) of the Companies Act 2013 read with Rules 5 (2) and 5 (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, it is stated that No employee of your Company was in receipt of remuneration for any part of the year at a rate which is more than Rs.5 lacs per month. Energy, Technology & Foreign Exchange The data on Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo in accordance with the provisions of Section 134 of Companies Act 2013 are given in the Annexure-I forming part of this report. Directors' Responsibility Statement Directors' Responsibility Statement as required under Section 134 of Companies Act 2013 is furnished in Annexure-II forming part of this report. Management Discussion and Analysis Report Management Discussion and Analysis Report, as required under Listing Agreement is enclosed as Annexure-III forming part of this report. Corporate Governance Your Company is fully compliant with the Corporate Governance guidelines, as laid out in Clause 49 of the Listing Agreement. Certificate received from the Auditors of the Company regarding compliance of Corporate Governance guidelines of SEBI as required under Listing Agreement is enclosed as Annexure IV forming part of the report. Code of Conduct Declaration affirming compliance with the code of conduct pursuant to clause 49 of the Listing Agreement is enclosed as Annexure V forming part of this report. Extract of Annual Return As provided under Section 92 (3) of the Companies Act, 2013 the details forming part of extract of the Annual Return in form MGT 9 is enclosed as Annexure VI. Secretarial Audit In terms of the provisions of Section 204 of the Companies Act, 2013 and Rules framed thereunder, a Secretarial Report in the prescribed format, obtained from a Company Secretary in practice, is required to be annexed to the Board's Report. In view thereof, your Board at its meeting held on November 11, 2014 appointed Mr V Esaki (CP 11022), No.47 VOC Nagar, Nehru Street, Anna Nagar East, Chennai 600 102 as the Secretarial Auditor of your Company. The Secretarial Auditors' Report for the fiscal 2015 is enclosed as Annexure VII. APPRECIATION Your Directors wholeheartedly place on record their appreciation for the continued and unstinted support of Government of India, Department of Fertilizers, Government of Tamilnadu, NICO, Financial Institutions, Banks, and all stakeholders during the year. It is most appropriate to mention that the Directors convey their gratitude to the Department of Fertilizers for settlement of subsidy bills on priority basis and to the dealers and farmers for their sustained support to Vijay products. Last but not the least that your Directors also place on record their appreciation for the dedication, commitment and sincere services rendered by the employees for sustained improvements. By order of the Board Dr I Vijayakumar Chairman & Managing Director Place : Chennai Date : August 10, 2015 |