REPORT ON ORGANISATIONAL STUDY AT FERTILISERS AND CHEMICALS TRAVANCORE

Ltd.

Vivek Menon (Reg. No: 85270050)

Under the Guidance of Dr. Sarada S

Reader

Submitted in partial fulfillment of the requirement for the award of the degree of MASTER OF BUSINESS ADMINISTRATION to the Cochin University of Science and technology

School Of Management Studies Kochi-682022, Kerala, India

Year-2008

CERTIFICATE

This is to certify that this REPORT ON ORGAINSATIONAL

STUDY AT FERTILISERS AND CHEMICALS TRAVANCORE

LTD. is a bonafide study of Vivek Menon of the third

Semester MBA student of School of Management Studies at

the Cochin University of Science and technology.

Place: Dr. Sarada. S

Date: Reader

DECLARATION

I Vivek Menon, third semester MBA student of school of

management studies at the Cochin university of science

and technology do hereby declare that this report on

ORGANISATIONAL STUDY AT FERTILISERS AND

CHEMICALS TRAVANCORE COCHIN Ltd. under the

guidance of Dr. Sarada. S, Reader, School of Management

Studies in partial fulfillment of the requirement for the

award of the degree of Master of business administration

is a bonafide study I have done in the organisation. I also

declare that this report has not been previously formed the

basis of award of any Degree, Diploma, Associate ship,

Fellowship or any other similar title of this or any other

university or institution.

Place:

Date: Vivek Menon

ACKNOWLEGEMENT

I would like to acknowledge my profound sense of gratitude to:

the Almighty for giving me strength and ability to successfully

complete the study and make this report on time

Dr. S Sarada, Reader, School of Management, Cochin

University of science and technology, my guide for this study,

who guided me with her valuable suggestion. She was a source

of inspiration for me to complete the study and make this

report on time and was instrumental in shaping this report.

Mr. John R Daniel, Chief Manager (Training) FACT, for his

guidance and support which he rendered throughout the study

and he was instrumental in shaping this report

this great institution of excellence which has encouraged me to

undertake such an organization study. I also extend my sincere

gratitude to our Director, Prof. (Dr.) Mary Joseph, of Schoolof Management Studies of the Cochin university of science

and technology.

to all employees of FACT for their kind cooperation for completion

of this work.

ABSTRACT

I underwent an organizational study at FACT to acquaint

myself with the business environment for a period of one

month from May 15, 2008 to June 14, 2008 as a part of the

MBA curriculum at the school of management studies of the

Cochin University of Science and Technology.

The study was conducted to understand the structure,

function and processes of various departments and their

interdependence. During the course of study I was able to

successfully interact with the employees of the organization.

They were happy to give me all possible information. They also

took me to the plants and worksites where I got the first hand

information about the organizational processes and its

functions.

The methodology consists of data collection through interview,

observation and literature review. The data collected from

different sources are classified, analyzed and interpreted.

Based on which an organizational structure, its functions and

various departments are identified. The various departmental

functions are clearly identified and their processes & activities

carried out are recorded. An in-depth analysis is made us to

understand the departmental process based on which a

process chart is prepared. The analysis further formed the

basis for identifying the departmental interdependence. The

study further revealed some of the challenges faced by the

departments. The study helped us to obtain an exact picture of

FACT based on which, a slot analysis is done. Finally, with the

help of latest statistics available from the organization, the

present trend and current scenario of FACT is clearly revealed.

LIST OF CHART, TABLES AND FIGURES

Chart

Chart No. Particulars Page No:

1 Organizational chart 20

2 Organizational chart of Finance department 21

3 Organizational chart of Materials department 29

4 Raw Material procurement process 31

5 Equipment and spares procurement process 33

6 Process flow in stores department 36

7 Process flow in traffic department 40

8 Organizational chart of production department 42

9 Production process 43

10 Organizational chart of market department 47

11 Process chart of market department 51

12 Organizational chart of quality control department 55

13 Organizational chart of R & D department 59

14 Organizational chart of fire & safety department 64

15 Organizational chart of computer division 68

16 Organizational chart of HR division 70

17 Organizational chart of training division 78

18 Training process chart 79

19 Organizational chart of vigilance department 82

20 Vigilance department process flow 83

21 Organizational chart of company secretariat 85

Tables

Table No. Particulars Page No:

1 Performance at NSE 10

2 Distribution of shareholdings 11

3 Brief picture of FACT 12

4 Milestone of FACT 15

5 Products of FACT 45

6 Areas and regions of distribution 50

7 Marketing operations 51

8 Sales turnover 54

9 Expenditure on R & D 62

10 Welfare scheme 72

11 Division wise staff strength 76

Diagrams

Diagram No. Particulars Page No:

1 Process flow in computer department 68

2 Interdependence of department 86

CONTENTS

Topic Page No:

Certificate from organization i

Certificate from guide ii

Declaration iii

Acknowledgement iv

Abstract v

List of figures, tables and chart vi

Chapter No:

1. About the study 1

2. History of FACT 3

3. About FACT 8

4. Functional departments

4.1. Finance department 21

4.2. Materials department 29

4.3. Production department 42

4.4. Marketing department 47

4.5. Quality control department 55

4.6. R & D department 58

4.7. Fire & Safety department 63

4.8. Computer service department 67

4.9. Human resource department 70

4.10.Training department 77

4.11.Vigilance department 82

4.12.Company secretariat 85

5. Functional interdependence of departments 86

6. Corporate social responsibility 89

7. Environment analysis 91

8. SLOT analysis 94

Conclusion 96

Bibliography

Chapter 1

About the study

1

1. OBJECTIVE OF THE STUDY The organizational study was carried out at FACT Ltd. Udyogamandalam to

achieve the following specific objectives:-

1.1. To understand the organizational framework & it’s functioning.

1.2. To gain knowledge about different departments of the organization and

the functions.

1.3. To study the interdependence of different departments.

1.4. To make a SLOT analysis of the organization

2. METHODOLOGY OF THE STUDY 2.1. Observation

By observing the general surrounding, the functional process,

interactions of employees etc.

Work site and plants were visited were the actual process of production

and activities of various department were seen and understood. 2.2. Data collection

2.2.1. Direct method

Through Interview & discussion

We interacted with the employees and understood the work and

responsibility carried by each of them. This helped us to

understand the various department and their functions clearly.

Further discussion with them revealed some key functions and

process carried by each department and the departmental

interdependence.

2.2.2. Indirect method

Literature review

Company’s internal records, Publication, Annual report, Journal,

statutory report, website (official site & others).

The data collected company’s departmental manual added key

information to this report and help us to understand the process

carried by each department in detail. Annual reports are used as

statistics to reveal the present scenario of the organization.

2

Previous report on organizational study formed basis for shaping

this report.

2.2.3 Data Authentication

The process chart prepared for each department was given to the

respective department heads for correction. The rough report

prepared was also given to the organizational guide for

correction.

3. LIMITATIONS OF STUDY 3.1. Time was a major limiting factor.

3.2. Secondary data available from company manuals were outdated (the

manuals are being updated).

3.3. Lack of co-operation from certain departments due to their work load.

Chapter 2

History of FACT

3

HISTORY OF FACT

Man’s history is replete with revolutions, responsible for molding his

system of thought and shaping his modes of living. Revolutions have, more

often than not, emerged out of crisis-situations it was one such crisis

situation that guided the enlightened perception of a far sighted visionary

to form FACT. Yes! The FERTILISER AND CHEMICALS TRAVANCORE

LIMITED-popularly known as FACT-was indeed a revolution when it was

established as the first large scale fertilizer factory in the country. Since

then, it has played a major role in creating fertilizer consciousness among

our farmers, and giving a positive direction to the modernization of

agriculture in India. And that, of course is an interesting story-a story of

never ending challenges and constructive responses.

The beginning

The 1940,s were a time of critical food shortage in our country. The

traditional approach to cultivation was not of much help in finding a

solution to this problem. And nitrogenous fertilizer had not yet arrived on

the agriculture scene in sufficient quantities to make any perceptible

impact. A revolution was indeed necessary to change the status quo. And

when it came, it did through the vision of Dr. C.P. Ramaswami Aiyar, the

Dewan of the former Travancore State, who mooted the idea of increasing

food production by the application of fertilizer as a long term solution to

food problem. To give concrete shape to his idea, he sought the help of

Seshayee Brothers Ltd. Industrialist known for their pioneering work. And

India’s first large-scale fertilizer plant was set up in 1944 at Udyogamandal

on the banks of the river periyar in Kerala State. The new venture of

course had to go through many teething troubles. For instance, the raw

materials necessary for the production of ammonium salts were not

available in the state. But this deficiency was overcome by adopting a

revolutionary method known as the FIREWOOD GASIFICATION PROCESS.

4

However, initial difficulties notwithstanding, the plant at Udyogamandal

went into commercial production in 1947, with the slated capacity to

manufacture 50,000 tonnes of Ammonium Sulphate (10,000 tonnes of N).

This was followed by the production of SUPERPHOSPHATE in a new plant

with a capacity of 44,000 tonnes. A sulphuric acid plant of 75 tonnes per

day was also installed which was considered large going standard at that

time. Meanwhile the inner dynamics of FACT was finding another

expression in the formation of new unit with the help of the State

Government and Methur Chemical & Industrial Corporation Ltd., for the

production of caustic soda which later become today’s Travancore-Cochin

Chemical Ltd., a Kerala Government undertaking. This indeed was a big

leap forward as it replaced all the imports of that product, saving a

considerable amount of foreign exchange. FACT was the first to use its by-

product, chlorine, as hydrochloric acid to produce Ammonium Chloride.

These by-products produced by FACT paved the way for setting up of other

industrial units around the FACT complex viz. Hindustan Insecticide Ltd.,

Indian Rare Earth Ltd., etc.

Expansion

In the late 50s, the Udyogamandalam Division launched its first expansion

with an outlay of Rs. 3 crores. Highlights of the period were the installation

of two plants to produce Phosphoric Acid and Ammonium Phosphate

(16:20 Grade). The second stage of expansion involving Rs. 2 crores saw

the replacement of the Firewood Gasification Process and the Electrolytic

Process by the Texaco Oil Gasification Process for which a new plant was

set up.

FACT became a Kerala State Public Sector Enterprise on 15th August

1960. On 21st November 1962, the Government of India became the major

shareholder. The 2nd stage of expansion of FACT was completed in 1962.

5

The 3rd stage of expansion of FACT was completed in 1965 with setting up

of a new Ammonium Sulphate Plant.

FACT has been a pace-setter in marketing evolving a continuous and

comprehensive package of effective communication with farmers and

promotional programmes to increase the fertilizer consciousness among

our farmers. In fact, FACT was the first fertilizer manufacturer in India to

introduce the village adoption concept since 1968 to improve agricultural

productivity and enhance the overall socio-economic status of farmers.

FACT has a well organized marking net work, capable of distribution over

a million tones of fertilizers.

With the licensing of Cochin Division in 1966 FACT further expanded and

by 1976 the production of sulphuric acid, phosphoric acid and Urea was

started. In 1979 Production of NPK was commercialized.

Technical Divisions

FACT Engineering and Design Organization (FEDO) was established in

1965 to meet the emerging need for indigenous capabilities in vital areas of

engineering, design and consultancy for establishing large and modern

fertilizer plants. FEDO has since then diversified into Petrochemicals and

other areas also. It offers multifarious services from project identification

and evaluation stage to plant design, procurement project management,

site supervision, commissioning and operating new plants as well as

revamping and modernization of old plants. FEDO received international

accreditation ISO 9001 2004 for quality system standards covering areas

of consultancy, design & engineering services for construction of large

fertilizer, petrochemicals, chemicals and related projects including

purchasing, construction, supervisor, inspection and expediting services.

FACT Engineering Works (FEW) was established on 13th April 1966 as a

unit to fabricate and install equipment for fertilizer plants. FEW was

originally conceived as a unit to fabricate and install equipment for FACT’s

6

own plants. Over the year it developed capabilities in the manufacture of

class I pressure vessels, heat exchangers, rail mounted LPG tank wagons

etc. It has a well equipped workshop approved by Lloyds Register of

Shipping, further; this division has excelled in laying cross country piping

fabrication and installation of large penstocks for hydel units in Kerala.

The Cochin Division of FACT, the 2nd production unit was set up at

Ambalamedu and the 1st phase was commissioned in 1973. The 2nd

phase of FACT Cochin Division was commissioned in 1976. The project

was designed to produce Ammonia which would be converted to Urea and

also to produce high analysis, water soluble NP fertilizers. This division

comprises of a number of large capacity plants to produce Ammonia, Urea,

Sulphuric Acid, Phosphoric Acid and Fertilizers like FACTAMPHOS 20-20

and DAP 18-46.

FACT has also a Research & development Department which carries out

research related to fertilizers. This Division is also capable of doing

fundamental research in areas of fertilizers and chemicals technology. So

far FACT R & D has taken 17 patents in areas like Sodium Fluoride,

Sulphuric Acid and Ammonium Phosphate.

Breakthrough

FACT took a major breakthrough, when its 50,000 TPA plant of

Caprolactum was commissioned in 1990 as a major diversification plan

from our traditional field of fertilizers and allied chemicals. The plant with

a capacity outlay of Rs. 368 crores utilizes the most modern technology

and the product is acknowledge as one of the best in the world. It also

produces 2, 25,000 tonnes per Ammonium Sulphate as co-product.

7

Subsequently, FACT set up a 900 TPD Ammonia plant at Udyogamandal

with an investment of Rs 618 crores. This replaced the old Ammonia plant

of Udyogamandal Division. The plant commissioned in 1998.

FACT has been entering into a ‘Memorandum of Understanding, (MOU)

with the ministry of chemicals and fertilizers every year. This is as per the

guidelines of DPE, Ministry of finance GOI. The objective of FACT is to

achieve excellence in performance as per the MOU agreement.

Chapter 3

About FACT

8

1. VISION & MISSION OF FACT

1.1. Mission of FACT To function as a dependable and globally competitive producer of fertilizer

and other allied products and to develop self reliance in the field of

engineering and technology, especially in the field of fertilizers, chemicals,

petrochemical, oil & gas industries

1.2. Vision of FACT To emerge as a leading company in the business of providing quality

agriculture and industrial inputs and providing engineering services for

industrial and infrastructural facilities.

2. CORPORATE OBJECTIVES

2.1. To be of service to the nation and to contribute effectively to its economic

well being and growth through the production and marketing of fertilizers

and chemicals and through the acquisitions/development and

dissemination of engineering technology know-how and skills.

2.2. To sustain and improve its pioneering role in the development of

indigenous engineering and technology through research and

development.

2.3. To improve productivity and maintain high standards of quality and adopt

effective measures for controlling cost and minimizing dependence on

imports.

2.4. To ensure for its customers the availability of its products and services on

reasonable terms, for its shareholders a fair return on capital invested

and, for itself, development of adequate internal resources for continual

growth and expansion.

2.5. To actively work for rural uplift through guidance, advice and service to

the farmers in co-operation with all other agencies working for agriculture

development and allied activities.

2.6. To develop, train and maintain a team of motivated and disciplined

personnel with required skills and abilities, and to encourage innovation

9

and to create a condition for their functioning and career development so

as to improve their overall quality of life

2.7. To project a favorable image of the company and its operations, in the

society in which it operates, amongst its customers and suppliers and

amongst the public in general.

2.8. To continuously plan its future operations for sustained growth and

stability for meeting the needs of the country.

3. CORPORATE GOALS 3.1. To achieve a net profit of 200 crore per year with a turnover of Rs.2100

crore by the year of 2010

3.2. To focus on cost reduction and technology up gradation in order to become

competitive in each line of business.

3.3. To constantly innovate and develop new products and services to satisfy

customer requirements.

3.4. To invest in new business lines, where profit can be made on sustainable

basis over the long term.

3.5. To compete through speed, agility and flexibility in recognizing and

capturing opportunities in existing markets.

3.6. To invest sufficiently to stay in the game but avoid premature

commitments.

4. LEGAL FRAME WORK OF THE COMPANY FACT is a public limited company registered under the Companies’ act

1956. As a major industrial Organisation, FACT complies with all laws and

statutes which govern industries in general.

1. Factories Act, 1948

2. Excise Act, 1944

3. Sales tax Act, 1959

4. Industrial Disputes Act, 1947

5. Employee Staff welfare Act, 1948

6. Workmen Compensation Act, 1923

10

7. The Payment of Gratuity Act, 1972

8. The Payment of Wages Act, 1936

9. Trade Unions Act, 1926

10. Standing Orders Act, 1946

11. Payment of Gratuity Act, 1972

12. Provident Fund and Miscellaneous Provisions Act, 195

5. OWNERSHIP PATTERN The Fertilizers and Chemicals Travancore Ltd (FACT), is a Schedule ‘A’

category Government of India enterprise, under the administrative control

of department of fertilizers in the Ministry of Chemicals and Fertilizers.

FACT was incorporated in 22/09/1943 and in 1960’s the Government of

India became the major shareholder.

A Board of Directors manage the Organisation. The chairman of the Board

of Directors is the Managing Director. FACt has a full time Finance

Director, a Technical Director and a Marketing Director. There are also six

part time Directors on the Board, nominees of Central and State

Government.

Shares of the company are listed at National stock exchange of India

(N.S.E)

PERFORMANCE OF SHARES AT NSE

Month High (Rs) Low (Rs)

April 33.85 28.35

May 34.00 27.50

June 27.50 21.25

July 30.90 23.00

August 27.35 21.70

September 26.80 24.70

October 26.15 24.10

11

November 23.90 22.15

December 24.80 21.75

January 26.85 23.75

February 26.40 23.75

March 23.00 20.55

Source: Annual Report 2006-07

Table No: 1

DISTRIBUTION OF SHAREHOLDING

Category Number of shares Percentage of

shareholding

Government holding

Government of India 345465200 97.38

State Government 2585000 0.72

Sub total 348050200 98.10

Non promoter

holding

Insurance

companies 4026854 1.14

Sub total 4026854 1.14

Others

Private corporate

Bodies 473597 0.14

Indian public 2187434 0.62

NRI’s or OCB’s 14316 -

Clearing member 19573 -

Sub total 2694926 0.76

Grand total 3554771974 100.00

Source: Annual Report 2006-07

Table No: 2

12

6. BRIEF PICTURE OF FACT

Name Fertilizers And Chemicals

Travancore Ltd (FACT)

Slogan Pioneers in progress

Established in the year 1944

Location Udyogamandal, Cochin, Kerala

Promoters Government of India

Production units of

Fertilizers

Udyogamandal & Ambalamedu

Caprolactum Udyogamandal

Fabrication

Division FEW Palluruthy, cochin

Consultancy Division FEDO Udyogamandal

Marketing Division

Head office

Udyogamandal

Area offices Trivandrum, Chennai,

Bangalore and Hydrabad

Liaison Offices Trivandrum, Chennai, Mumbai,

New Delhi

Marketing Territory South India: Kerala, TamilNadu,

Karnataka, Andhra Pradesh

Table No: 3

13

7. DIVISIONS OF F.A.C.T

7.1. Udyogamandal Division

FACT commenced operation at Udyogamandal with the commissioning of a

50,000 tonnes per annum Ammonium Sulphate Plant in 1947.

In the decades that followed multi stage expansion programs were

undertaken bringing in the latest technologies of the day which were

quickly mastered and successfully implemented. Today the division is 40

year old small capacity plants and 10 year old state of the art technology

plants. The latest addition to this unit was a 900 tonnes per day Ammonia

Complex set up with an investment of RS 618 crores. FACT Udyogamandal

division is certified to ISO 14001, the environmental system standards.

7.2. Cochin Division

FACT Cochin Division was set up in the 1970's at Ambalamedu, 30 km

from Udyogamandal and adjacent to the Cochin Refineries. Phase-I of the

division saw the setting up of an integrated Ammonia urea complex

utilizing Indian Engineering skills. A large scale complex fertilizer plant of

485,000 TPA was set up as phase-II. Sulphuric acid and Phosphoric acid

plant of economy scale were also set up.

7.3. Petrochemical Division

FACT diversified into petrochemicals in 1990 with the production of

Caprolactum. This versatile petrochemical product is the raw material for

the manufacture of nylone-6, which finds extensive application in textiles,

tyre cord and engineering products. Thanks to its high quality, the product

has been acknowledged as among the best in the world. The division is

located adjacent to the Udyogamandal division. Co-product Ammonium

Sulphate is transferred to the fertilizer plant of Udyogamandal division for

processing.

14

7.4. FACT Engineering & Design Organization (FEDO) FACT Engineering & Design Organization (FEDO) was established in 1965

for utilizing the considerable indigenous plant building expertise

accumulated by FACT in its process of nurturing the nascent chemical

fertilizer industry. FEDO is today one of India's premier project engineering

organization, catering to a wide spectrum of industries like petrochemicals,

refining, pharmaceuticals, hydrometallurgy etc as well as petroleum

storage, environmental engineering, offsite facilities etc. The division

undertakes project execution on consultancy and turnkey basis, handling

the intricacies of the technology sourcing, design and engineering,

hardware procurement and construction with practiced ease. FEDO is ISO

9001 certified.

7.5. FACT Engineering Works (FEW)

Established in 1966, FACT Engineering Works was originally conceived as

a unit to fabricate and erect equipment for fertilizer plants. Over the years,

it developed capabilities in the manufacture of Class I Pressure Vessels,

Heat Exchangers, Columns, Towers etc. required for the fertilizer,

petrochemical and petroleum industries. FEW received ISO 9002

Certification in 1998.

8. BOARD OF DIRECTORS & EXECUTIVE DIRECTOR

BOARD OF DIRECTORS Dr. George Sleeba Chairman & Managing Director

Sri. Asokan A. Director (Marketing)

Sri. Vijay Chhibber Part-time Director (Nominee of Govt. of

India)

Dr. Jivtesh Singh Maini Part-time Director (Nominee of Govt. of

India)

Dr. R. Kannan PhD. I.A.S Chief Vigilance Officer

15

EXECUTIVE DIRECTOR Sri. Venkatakrishnan.S Executive Director (Finance)

In Charge

Sri. K. V. Balakrishnan Company Secretary

Source: Annual report 2006-07

9. MILESTONES OF FACT 22/09/1943- Incorporation

26/06/1947- Production started

1959-60- UD-1st stage expansion completed

15/08/1960- FACT came under public sector4

1962- UD-2nd stage expansion completed

21/11/1962- Govt. of India became major

shareholder6

24/07/1965- FACT Engineering & Design

Organization

13/04/1966- FACT Engineering works

07/06/1966- CD-Phase I License issued

15/10/1966- UD 3rd stage expansion completed

01/10/1971- UD 4th stage expansion completed

27/04/1973- CD I, Urea plant commissioned

01/10/1973- UD 4th stage 150 TPD Ammonium

phosphate

10/11/1976- CD-II, Sulphuric acid plant

commissioned

16

10/12/1976- CD-II, Phosphoric acid plant

commissioned

10/01/1977- CD-II, NPK trial run started

01/04/1979- CD-II NPK Commercialized

1981- 450 TPD Sulphuric acid plant

modified to DCDA process

18/05/1984- PD-Caprolactum technical

collaboration agreement

14/09/1984- PD-Zero date of ASCC project

06/08/1985- PD-Caprolactum license issued

09/11/1988- SO2 Acid plant Commissioned

26/07/1989- Award for excellence in performance

13/12/1989- FEW shifted to Palluruthy

21/09/1990- Oleum production commenced

20/12/1990- CD-12 MW captive power plant

01/03/1991- PD-Caprolactum commercial

production started

01/03/1991- UD-New Ammonium Sulphate

Commercial production started

22/03/1998- 900 TPD Ammonia plant commercial

production started

25/09/1993- Foundation stone-900 TPD Ammonia

plant

03/11/1998-09/11/1998-

900 TPD Ammonia plant guarantee

test run

Table No: 4

17

10. PRODUCTS & PRODUCT MIX

10.1. PRODUCTS 10.1.1. Finished products

Ammonium Sulphate - Udyogamandal Division

Ammonium Phosphate / Complex fertilizers / Factamfos - Udyogamandal

Division & Cochin Division

Caprolactum - Petrochemical Division

Biofertilizers - Research & Development Division

10.1.2. Exported Products

Caprolactum - Petrochemical Division

Ammonium Sulphate - Udyogamandal Division

10.1.3. Byproducts

Nitric Acid & Soda Ash - Petrochemical Division

Gypsum - Udyogamandal Division & Cochin Division

Carbon Dioxide Gas - Udyogamandal

10.1.4. Intermediary Products

Ammonia - Udyogamandal & Cochin Division

Synthesis Gas - Udyogamandal Division

Sulphuric Acid - Udyogamandal & Cochin Division

Oleum - Udyogamandal Division

SO2 Gas - Udyogamandal Division

Phosphoric Acid - Udyogamandal & Cochin Division

10.2. PRODUCT MIX

10.2.1. Straight Fertilizers

Ammonium Sulphate - Containing 20.6% N in Ammonical form and

24% sulphur, an important secondary nutrient.

Ultraphos - FACT markets imported Rock Phosphate containing 32%

P2O5 under the brand name "Ultraphos". This high analysis fertilizer is

18

found suitable for application especially in Coconut/ Rubber/ Oil Plam/

Tea Plantation.

10.2.2. Complex Fertilizers

Factamfos 20:20:0:15 - NPK complex fertilizer - Factamfos or

Ammonium Phosphate contains 20% N in ammonical form, 20% P in

water soluble form and 15% sulphur; a secondary plant nutrient, which

is now attaining great importance in agriculture. Factamfos also can be

used for foliar spraying.

10.2.3. NPK Mixtures

NPK Mixtures - FACT prepares crop specific standard mixtures for all

crops in Kerala and also special NPK mixtures for plantation crops like

Tea, Coffee, Cardamom, Rubber etc.

Rose Mixture - A fertilizer tonic for Roses.

Vegetable Mixture - A special blend exclusively prepared for vegetable.

Garden Mixture - A special nutrient combination for both flowering and

foliage ornamental plants.

10.2.4. Imported/ Traded products - FACT has entered into direct import of

MOP and also trading of Imported Urea.

Bio fertilizer - FACT produces and markets 'N' fixing Bio fertilizers -

Rhizobium, Azospirillium and 'P' solubilising bio fertilizer -

Phosphobactor.

10.3. CHEMICALS

Anhydrous Ammonia - FACT produces Ammonia of over 99.96% purity.

Sulphuric Acid - FACT has one of the largest plants in Asia and it

manufactures Sulphuric acid of 98% purity.

Caprolactum - It is the raw material for Nylon-6. The product quality of

FACT Caprolactum is among the best available in the world.

Nitric Acid and Soda Ash - Small qualities of these are obtained from

Caprolactum plant as byproduct.

19

Nitric acid (55%) Capacity : 3800 TPA

Concentration (by weight) : 55% (min.)

Ammonium Nitrate (by weight) : 1% (max.)

Specific gravity at 20 0C : 1.339

Delivery : Ex-factory - tanker load

Soda ash (off grade) Capacity : 4750 TPA

Total alkalinity (as Na2CO3) (by wt) : 95% (min.)

Sulphate (as Na2SO4) (by weight) : 1.5 to 3%

Bulk density (g/L) : 1.35 to 1.50

Delivery : Ex-factory - bulk

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ATE

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GM

(CD

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M (F

&F)

CM

SALE

CM

DIS

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CM

AG

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MPR

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UC

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N

CM

PUR

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ASE

CM

MA

INTE

NA

NC

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NY

SE

CR

ETA

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MG

RTR

AFF

ICM

GR

STO

RES

CM

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PEPE

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MG

RSA

FETY

M

GR

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ALI

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MG

RST

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CM

FEW

C

M F

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(PD

) JG

M (U

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GM

(UC

)

KL

AP

KA

RTN

MG

RR

& D

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FFIC

AM

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SULP

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PHO

SPH

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PH

OSP

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RIC

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CID

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MM

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IA

20

ABBREVATIONS OF ORGANISATION CHART

DIR- DIRECTOR

TECH- TECHNICAL

C.V.O- CHIEF VIGILANCE OFFICER

C.P- CORPORATE PLANING

P.C- PRODUCTION COORDINATION

CD- COCHIN DIVISION

UC- UDYOGAMANDAL COMPLEX

F & F- FEDO & FEW

JGM- JUNIOR GENERAL MANAGER

UD- UDYOGAMANDAL DIVISION

PD- PETROCHEMICAL DIVISION

CM- CHIEF MANAGER

C.S.P- CHIEF SUPERINTENDANT PRODUCTION

C.M.E- CHIEF MECHANICAL ENGINEER

MGR- MANAGER

P.E- PLANT ENGINEER

Chapter 4

Functional Departments

FINANCE DEPARTMENT

1. OBJECTIVES 1.1. To Manage & account for the financial resource of the Organization, to

forecast its requirement in the future and plan accordingly and to check

for deviation.

1.2. Report the financial performance of the company to Management,

stakeholders & and to comply with the Govt. rules and regulations

2. ORGANISATIONAL CHART OF FINANCE DEPARTMENT

Chart no: 1

Director (Finance)

CM (Bills & Mat)

DGM (IA)

CM (Sales)

Mgr (Tax & Duties)

CM (Costing, MIS, Budget)

Mgr (cash, Bank & Payroll)

CM (Gen A/c)

DGM (Finance)

Mgr (IA)

3. FUNCTIONS OF FINANCE DEPARTMENT Some of the main functions are Payroll, billing, Preparation of journal,

ledger and trial balance, Banking, Financial resources & materials

accounting, Budget preparation, Cost accounting, Auditing, Preparation of

financial statements & reports, Corporate Planning.

21

22

4. PROCESS OF FINANCE DEPARTMENT Finance department in FACT is divided into five sections for carrying out

its process. They are:

1. Bills & Materials

2. Sales

3. Costing, MIS, Budget

4. Cash, bank & Payroll and

5. Tax & duties

4.1. BILLS & MATERIALS-The main functions are Stores accounting and

Receiving, Dispatch and holding of bills

4.1.1. Bills section Bills section deals with the contract account for execution of civil works

and other construction/erection, maintenance and services. It includes: 1. Sale of tender form

2. Remittance of EMD

3. Remittance of security deposit

4. Issue of materials to the extractors

5. Receipts to certified bill in the specified format

6. Security on running account bills and final bill

7. Statutory procedures and formalities in works contract

4.1.2. Stores accounting

Main functions of stores accounting are:

1. Receipts of stores

2. Issue of stores

3. Returns of stores

4. Value adjustments

5. Reconciliation with control accounts

6. Unconsumed materials lying at site at the close of financial year

23

4.2. SALES ACCOUNTING Some of the functions are

1. Accountability for selling and distribution of products & byproducts

2. Recording the transaction

3. Transfer of information from depots to HO

4. Compilation of reports

4.3. THE COSTING, MIS AND BUDGET SECTION is concerned with

ascertaining the cost of production, providing information, helping to

prepare a budget, forecasting the performance and finally making a plan.

4.3.1. Cost accounting

Identification of the cost centre - Direct expenses is recorded to the

respective cost centre. Indirect expenses are separately booked and

allocated at the end of the year. Cost sheet is prepared in two ways. The

item in the cost sheet is compiled on the basis of process of the products

or on the basis of elements of the product.

Cost centre in Ugyogamandal Division Process water, DM water, Steam, CPP, Ammonia, Sulphuric Acid, So2/

Oleum, Phosphoric acid, Pollution Control, Ammonium Sulphate,

Ammonium Phosphate

Classification of cost

Variable cost-Raw Materials, Intermediate products, Consumable,

Products, Utilities, Packing materials, Pollution control expenses.

Fixed cost-Fixed cost of a product mainly consists of conversion cost of the

product of Salaries and wages (Direct, Indirect, Administration &

Maintenance),Staff welfare expenses, Insurance, Plant maintenance,

Depreciation, Factory overheads, Administrative overheads, Head office

overheads, Gratuity and bonus, Interest on term loans and working

capital.

24

4.3.2. MIS (Management information system) To provide the management with vital facts which affects the efficient

running of the business for decision making on planning, organizing and

controlling the major activities of the organization and initiating suitable

action.

MIS Briefly consists of:

1. Divisional Reports- Two monthly reports for each division - one for the

finance department and another for the GM’s office

2. P & L Account-Statement and its analysis

3. Production performance of the division

4. Inventory position

5. Cost of production-Actual and budget for the month

6. Specific information important for the management-Major projects,

man-hour utilisation etc.

4.3.3. Budgeting

Two types of budget-Revenue and Capital budget

Two types of estimates- Budget estimate and revised estimate

Revenue Budget

Every year early in August detailed production targets and norms for

consumption of materials for remaining portion of the current year and

also for the next financial year are prepared by the head of Divisions.

Capital Expenditure

Shows all items of capital expenditure to be undertaken during the budget

period like expenditure on acquisition of new assets like machinery,

furniture and office equipments which have reasonable life; expansion of

existing facilities and modification and improvements to plant and

machinery resulting in i) increase in capacity ii) Increase in useful life iii)

Improvement in quality of output and iv) reduction in cost of output is

treated as capital expenditure.

25

Budget revision While preparing the next year’s revenue budget, the revenue budget for the

current year is revised, based on the actuals from April to September and

the anticipated trend for the remaining period.

Monthly report On closing of the accounts of the months a monthly P & L account is

prepared for each Division and the same is send it to the Division Head,

FD and CMD. This report would give a comparison of the actuals for every

month against budgeted performance.

4.4. THE CASH, BANK AND PAYROLL SECTION is concerned more with

the day to day activities and less of future forecasting & planning.

4.4.1. Cash and Bank Accounts Section

The various functions include: 1. Receipt of cash, cheques, bank drafts, and postal money orders

2. Payment of cash, cheques, bank drafts, and letters of authority

3. Handling of bank deposits/withdrawals, custody of cash and inter

unit transfer of funds

4. Maintenance of petty cash books and cash books

5. Reconciliation of bank accounts

6. Security arrangement of cash handling

7. Safe custody of valuable documents

8. Cash interests calculation

9. Any other duties assigned by authorized officer

4.4.2. Payroll Section Functions of the section are:

1. Preparation and disbursement of salaries and wages to managerial

and non-managerial employees

2. Effect various recoveries through payroll and remit the same to

concerned agencies

3. Processing of various personal payments advances

26

4. Keeps books of account for the above transaction

4.5. TAX & DUTIES SECTION is concerned with calculation & payment of

various taxes and duties to the Government.

5. SOME KEY INFORMATION 5.1. Insurance schemes

Insurance schemes have undergone a drastic change in FACT due

shortage in working capital and lack of profit. From the earlier view of

insuring everything under all, FACT prefers selective coverage.

E.g. Fire insurance is done only in departments or plants prone to fire.

Deciding on insurance scheme is not the prerogative of finance department

alone. The engineering department has to approve the plan and after the

department wise approval, the corporate level approval has to be obtained.

The various insurance schemes are:

1. Fire Insurance.

2. Machine break down insurance.

3. Electronic equipment insurance.

4. Fidelity insurance and cash in transaction/cash at safe/payroll

insurance.

5. Insurance for vehicles and heavy equipment.

6. Open transit risk for all inland and all foreign purchases.

7. Loss on profit insurance.

8. Personal accident insurance.

9. Storage insurance.

10. Insurance for stock of finished goods, raw materials, industrial stores.

5.2. Corporate plan Corporate plan is prepared by taking estimates and future projections for 5

years. The corporate plan is revised every year by deleting one year in the

27

beginning and adding one year at the end, keeping the total budget period

as 5 years. This plan projects the company’s position for the next 5 years.

5.3. Foreign Currency Management

A Committee is formed to look into and take decisions on a periodic basis

relating to the foreign currency. The committee has been constituted with

chief of internal audit as chairman and members being the chief of

finance, head of Cochin division, petrochemical division and head office.

5.4. Working Capital management

The Working capital is essential for any Organization to meet its day to day

requirements. Working capital may be specified as the firm’s current

assets over current liabilities. As a large scale company, FACT also

requires sufficient working capital to meet its daily requirements.

FACT uses letter of credit and bank guarantee mainly for the purpose of

financing the import of raw material. If it has to avail more than the

assigned quota the finance department will have to take permission of

Board of Directors.

FACT approaches different banks to meet its working capital requirement

and FACT maintains a consortium of banks for the same. They are:

BANKERS SUPPORTING FACT:

1. State Bank of Travancore

2. State Bank of Hyderabad

3. State Bank of India

4. Bank of Baroda

5. Bank of India

6. Canara Bank

7. Dena Bank

At present FACT has availed cash credit facility up to an amount of Rs.

188 crores and letter of credit up to Rs. 100 crores and bank guarantee up

to limit of Rs. 15 crores.

28

5.5. Auditing

Various types of audits in FACT are: Statutory audit, Government audit,

Cost audit, Income tax audit, Sales tax audit and Internal audit.

Internal Audit Section Some of the main functions are

1. Operational/ systems/ management audit

2. Proprietary audit and audit of sanctions

3. Routine audit

4. Surprise verification of physical stocks

5. Special audits and studies

6. CHALLENGES OF FINANCE DEPARTMENT 6.1. Working capital crunch

Due to which

6.1.1. Upgradation of plants & machinery is not possible

6.1.2. High quality equipment cannot be purchased. For the same reason,

FACT goes for the lowest quoting bid.

6.1.3. Cannot maintain adequate stock of fertilizer for combating shortage

6.1.4. Lack of flexibility in production

6.2. Low availability of credit due to nonpayment of loans & security to keep

for loans. Due to which the organization: 6.2.1. Cannot grow and therefore stagnates

6.2.2. Cannot compete with other fertilizer companies due to lack of fund

MATERIALS DEPARTMENT

1. OBJECTIVES 1. To control and account for the materials in the organisation.

2. To ensure the availability of materials and its quality.

2. ORGANISATIONAL STRUCTURE OF MATERIALS DEPARTMENT

Chart no: 2

GM Material

CM Purchase RM

Mgr Stores Mgr Traffic

Dy. CM Raw Materials

Mgr E.S.S Mgr F.F.T.S

3. FUNCTIONS OF MATERIALS DEPARTMENT include:

1. Importing raw materials under the approval of safe purchase committee constituted by the Board of Directors

2. Maintaining adequate raw materials needed for production

3. Procurement of Machineries, Intermediaries, equipment & spares

4. Inspection of Materials

5. Transportation of Raw materials, Products and Byproducts

6. Accountability for materials

7. Purchase of stationary, and other Equipment needed by individual

department

8. Vendor Development

29

30

This department is divided into 3 Sub Departments. They are:

1. Purchase

2. Stores 3. Traffic (Logistics)

3.1. PURCHASE DEPARTMENT The purchase procedure covers the following areas of procurement of

goods and services for the company.

1. Capital items (For project and other purposes).

2. Equipment and spares.

3. Raw material & Intermediary materials

4. Package items involving design, supply, erection and commissioning.

Purchase Department is again divided into 3 sections. They are:

1. Raw materials 2. Equipment spares and supplies

3. FEDO & FEW Transport, Contracts and Stores

3.1.1. RAW MATERIALS SECTION

Objectives 1. Purchase of materials for production, from India and abroad

2. Make available adequate amount of material at the right time

3. Follow a fair & transparent procedure in the above activities

Functions 1. Importing raw materials under the approval of safe purchase

committee constituted by the Board of Directors

2. Procurement of Materials needed for production

3. Determination of quantity of materials required

4. Issue of Purchase order

5. Pre & post dispatch Inspections

6. Insurance

7. Payment

Raw materials are Sulphur, Rock phosphate, Furnace oil, Naphtha,

Ammonia, Benzene, Phosphoric Acid, Caustic soda and Sulpuric Acid.

RAW MATERIAL PROCUREMENT PROCESS

Chart no: 3

CHALLENGES TO RAW MATERIAL PROCUREMENT

Payment Inspections

Raw material requirement

Raw Materials Department

Purchase order

Raw material Transporting

Purchase Requisition

Bid evaluation & Financial Concurrence

Vendor Development

Entering into Contracts

Production Plan

Raw material Storing

1. Scarcity of Raw materials

2. Sky rocketing prices

3. Shipping Problems

4. Working Capital crunch

3.1.2. EQUIPMENT & SPARES SECTION

Objectives 1. Purchase of Equipment & spares from India or abroad

2. Make available spares at the right time

3. Follow a fair & transparent procedure in the above activities

31

32

Equipment & Spares Include 1. Capital items like heavy machinery or plant (For project and other

purposes)

2. Equipment and spares

3. Package items involving design, supply, erection and commissioning

Functions 1. Importing materials under the approval of safe purchase committee

constituted by the Board of Directors

2. Determination of actual requirement by checking with stores,

technical department, management and giving specifications

3. Vendor Development

4. Bid evaluation & financial Concurrences

5. Entering into Contracts

6. Issue of Purchase order for equipment & spares

7. Inspections of materials and stores

8. Insurance

9. Payment

EQUIPMENT & SPARES PROCUREMENT PROCESS

The User departments give their requirement which is validated by the

Technical department and is finally approved by the management for issue

of purchase requisition. The purchase requisition is checked with the

stores stock. If the store already has the item then it is supplied to the

concerned department; otherwise items are procured with the help of a

vendor. In case of specific goods such as tube light, bulb and fan vendor

are already specified by the technical department and approved by the

management. Whenever the user department needs them the store

department moves forward to procure them. The process can be

diagrammatically as follows:

Payment Inspections User Department Requirement

Purchase order

Material Procurement

Purchase Requisition

Bid evaluation & Financial Concurrence

Vendor Development

Entering into Contracts

Validating Requirement

Available at stores

Raw material Procurement

YES NO

Chart no: 4

Purchase order Detailed purchase order is issued soon after the letter of intent and

normally within 30 days of issue of letter of intent.

Inspection & Monitoring The materials department performs expediting of orders. In certain cases

other agencies appointed for the purpose. Materials department

continuously monitors vendor's performance to ensure timely delivery and

periodic status reports is made available to all concerned departments.

Inspection may be carried out by FACT or by third party inspection

agencies, depending on the nature of items and facilities available.

Department authorized for the inspection, receives the dispatch document.

The department responsible for the clearance maintains a register for

dispatch documents and updates entries on a day-to-day basis.

Payment of freight/certification of freight bills

It is the responsibility of the department head entrusted with clearance of

goods. All goods cleared from the carrier are forwarded to the receiving

Despatch

33

34

section of the stores department or department authorized for this

purpose. In case of bulk materials like stationeries, the consuming

department directly receives raw materials/intermediates the goods.

Materials received against turnkey jobs awarded to agencies responsible

for supply, transport, storage and erection are not taken into stock by

stores department.

Rejection/Damage of Materials

Rejected consignment is kept separate and the stores/receiving

department send a first information report to the supplier with the copy to

finance and purchase department. In all cases of rejection / shortage/

damage other than for reasons attributable to supplier, the stores

department takes up the matter with the insurers under advice to finance

department. Follow up of the claims and settlement with insurer is done

by finance department.

VENDOR DEVELOPMENT Vendor Pre-qualification

Pre qualified vendor list shall be maintained by materials department. The

vendor list comprise of all pre-qualified vendors under each category

stating clearly the respective capability in terms of volume of work,

specification, level of technology, etc with rating of the vendors.

Addition/deletion to vendor's lists is made on a continuous basis on the

above criteria.

There are three types of Purchase Requisition (PR) as follows:

1. For projects and major capital equipment

2. For stores, including stationary and office supplies, spares

3. For services

35

Inviting Bid Bids are invited by giving Advertisements in news paper, magazines,

media, website etc. The Purchase Manager invites the bid. Normally, 30

days from the date of enquiry is given for submission of bids in limited

tenders. For open tenders, 30 days from the date of appearance of

advertisement is prescribed.

Receipt and opening of bids

Bids are opened by officers from finance, administration and purchase

Department. Bidders representatives read the Bid which consists of Prices,

taxes and duties, payment terms, delivery period, performance guarantee

and brief description whichever is relevant.

Bid evaluation and financial concurrence

The technical part is forwarded to the indenting department by the

purchase department as soon as the bid opening formalities have been

completed. The steps involved in bid evaluation are:

1. Technical evaluation by indenter in consultation with other technical

experts, where necessary

2. Commercial evaluation by the purchase department in consultation

with other concerned departments

3. Review and approval of technical and commercial evaluation by the

competent authority to determine the bids, which are technically and

commercially suitable

4. Comparison of prices and financial evaluation by purchase

department in consultation with other concerned departments

Financial Concurrence

For purchases above Rs. 25000, the purchase recommendation is

forwarded to finance department. Sanctioning authority is formed as per

the delegation of powers. After financial concurrence, the proposal is

forwarded to the sanctioning authority through purchase order.

CHALLENGES OF EQUIPMENT & SPARE SECTION 1. Approval of Bids on the basis of lowest quotation where sometimes

quality is compromised

2. Low working capital to maintain sufficient stock of goods

3.1.3. FEDO & FEW, Transportation & Stores (FFTS) Section

The Functions of the section are:

1. Project related procurement for FEDO & FEW

2. In-house procurement for FEDO & FEW

3. Storage of Raw materials

4. Raw material transportation & Technical assistance for handling

3.2. STORES DEPARTMENT

Objectives 1. Collection and receiving of materials purchased

2. Inventory Management & Control

3. Issuing materials to user departments

4. Disposal of surplus and obsolete materials

Functions 1. Receiving

2. Holding

3. Inventory Control

4. Issuing

5. Disposal

PROCESS FLOW IN STORES DEPARTMENT

Chart no: 5

Receiving HoldingInspecting Inventory Management

Disposal Issue

36

37

Codification and classification All stocks items bears a 9 digit code prepared on a significant numbering

system. First digit is allocation for UD, CD and PD. Second to sixth digit

classifies materials to mechanical, electrical and general items. The

materials received are classified and arranged into 6 compartments-A, B,

C, D, E and F, each consisting of 20 shelves numbered from 1 to 20.

According to the above classification, the shelves are allocated for each

material.

Procedure followed

When a material is received, the stores officer inspects the items and is

approved by the stores manger for holding in the stores after verification.

The store in charge allocates materials to the specified shelf and records

the data in the Bin card. The store officer updates the data in the MIS. And

for issue of materials, the requirements forwarded by the departments is

verified and approved by the manager for dispatch. The issue is and

recorded in the MIS. However, for disposal the list of items to be disposed

is forwarded to the management by the stores. Approved items are

disposed or sold for scrap value and recorded in the MIS. Store is

responsible for all activities for ensuring inventory control, commissioning

of codes and disposal of scrap. Materials move into store only after

inspection conducted by store employees. Technical department help is

sort wherever required. Obsolete items are disposed.

MIS The stores maintain all its data in the computer and are updated every

time movement of materials takes place. The MIS gives the current status

of inventory and helps in the speedy replenishment of stock when

required. The MIS used is the OIIS (online integrated system). Items in the

stores are known to the management and other departments which need

that information. During the stock verification, the figures in the MIS and

physical stock are tallied.

38

Stock verification Stock verification is done by physical stock verification Team (PSVT) are

attached to finance department. ‘A’ and ‘B’ items are verified once in a year

and ‘C’ items once in 2 years. For those which are not covered under ABC

analysis XYZ is taken and frequency of verification is once in a year for ‘X’

& ‘Y’ Items and once in 2 years for ‘Z’ items. Along with this officer, stock

holding in-charge verifies stock daily and submits the report to PSVT and

when they come for inspection, the deviations in the report are clarified.

INVENTORY ANALYSIS DONE IN FACT

A-B-C Analysis ABC analysis is prepared by the computer centre based on the value limits

of: ‘A’ Items > Rs 50,000, ‘B’ Items < Rs 50,000 and > 5,000 and ‘C’ Items <

Rs 5,000. Computer centre prepares the list on basis of annual

consumption. Accordingly, items ‘A’ are given more attention and require

more control.

F-S-N Analysis Here, analysis is based on the consumption rate. Items moved within the

last 5 years may be classified as Fast moving(F), and those moved between

last 5 to 10 years are slow moving(S) and those not moved within last 10

years are non-moving(N). The last two groups are reviewed further to

decide on disposal.

X-Y-Z Analysis This analysis is done on the basis of stock in hand at the end of the

financial year. 80% value of total inventory is labeled as X, 15% value of

total inventory as Y, 5% value of total inventory as Z.

For spares V-E-D Analysis - Vital (V), Essential (E), and Desirable (D)

Vital are those spares whose non-availability results in very high

production down-time loss and/or entails very high cost due to emergency

purchase. Essential spares are those whose non-availability is expected to

cause moderate production down-time. Desirable spares are those whose

39

non-availability does not resulting in any significant production down time

loss. The list is reviewed once in 2 years.

CHALLENGES FOR STORES

1. Maintenance due to shortage of labour

2. Low stock of goods maintained due to shortage of Funds

3.3. TRAFFIC DEPARTMENT

Objectives 1. To ensure Loading and despatch of products

2. To ensure right quantity and right product to right vehicle and to the

right destination

Functions 1. Loading

2. Arrangement

3. Movement

Traffic department is responsible for the dispatch of products to various

markets. They maintain contacts with market department and production

departments. The dispatch section of marketing division gives the demand

of various depots in each state to the traffic department. Based on this,

schedules are formed and product is dispatched.

Process flow in traffic department

The marketing division selects the depots where fertilizer has to be

transported and gives the dispatch information to the traffic department.

The traffic department selects the vendor for transport. Depots are allotted

to vendors by the department.

Payment

Chart no: 6

The vendors are issued a vehicle ‘in’ slip which is a slip for the vehicle to

go into the loading site in which the destination, vehicle no, product or

byproduct to be loaded are recorded. Before loading the empty weight of

the vehicle is taken and after the loading the weight with the load is taken

by the C.I.S.F Security men. If deviation more than the specified limit is

noticed, the goods are either unloaded or reloaded. A copy of MDA

(Material Dispatch Advice) is given to the lorry driver for dispatching to the

concerned depot. When the goods arrive at the depot message is passed to

the department. And the signed copy of MDA is returned to the

department by the Vendors so as to enable him to collect payment. If the

load dispatch is found damaged, loss in quantity noticed, penalty is

charged from the vendor.

FACT has permanent workers for loading activity. The department engages

contracts to transport finished products from the plants to different depots

or to the customers. Packing the materials in the bag is also the

responsibility of the department. The product is bagged in HTPG bags. The

product is transported by, trucks and railway wagons. There is a private

railway siding for FACT at Kalamassery and also at Cochin Division. A full

Marketing division Transportation

MDA Issue

Weighing Traffic department

Vendor (Transport) Loading

Despatch information

Vehicle in slip issue

Depot

Signed MDA

40

41

rail wagon takes 2200 tones of product. A godown at Kalamassery stores

fertilizer. Lorries and trucks for the transportation are chosen based on the

tender.

Major Transport Contracts

A.S.R.T- A.S.R transport

B.T- Bharat Transport

COSMO- COSMO Carriers

E.L.F- Expert Liner Enterprise

L.R.L- Lucky Road line

J & P- J & P Enterprise

M.R.D- M.R.D Transport

P.K.A- P.K Aboobacker & Co

P & P- P & P Logistics

S.K.L.S - Sree Krishna Lorry Service

S.P.M- S.P Muthuraman

U.R- Union Road ways Limited

Optimisation Techniques

1. Transportation by railway

14 wagons of train booked at a time helps reduction of cost.

2. Outsourcing of Logistics

Certain issues like labour, vehicle repair can be overcome. This helps

in preserving the core competence of the department.

CHALLENGES OF TRAFFIC DEPARTMENT 1. Lack of fleet management system

2. Labour issues

3. Vendors Performance & Review

PRODUCTION PLANNING DEPARTMENT

1. OBJECTIVES 1. Production planning

2. Co-ordination of production function

3. Co-ordination with Maintenance and Production department.

2. ORGANISATIONAL CHART OF PRODUCTION DEPARTMENT

Chart no: 7

JGM (UD)

Production

CM (Production)

MAINTENANCE

C.M.E C.S.P

Ammonium Ammonium Sulphate

Phosphoric Acid

Sulphuric Acid

Ammonium Phosphate

Traffic

3. FUNCTIONS OF PRODUCTION DEPARTMENT 1. Planning daily production according to annual target

2. Submitting Plan to govt. and getting approval

3. Monitoring actual production & checking any deviation

4. Making revision plans according to actual production

5. Maintenance of plants

42

4. PRODUCTION PROCESS

Start here

Chart no: 8

Annual production targets for the next year are prepared based on

installed production capacity of the plant and production data for the

previous year. Necessary feedback is also taken from marketing

department while fixing the production targets. The production targets

thus fixed are presented to the corporate office for review and approval by

CMD and the plant managers are informed of the same. The production

and consumption ratios for the previous years are duly considered. All the

data are compiled to form the production budget. A copy of the production

budget is sent to the finance department for preparing finance budget. The

production plan and budget are then presented to the govt. for approval.

The production budget then acts as the basis for further performance

monitoring. Based on the production plan, purchase department initiates

action for procuring raw materials. In the event of any change in the

annual production plan becoming necessary, the corresponding change in

the raw material, requirements are intimated to the purchase department.

Production planning department receives data from all the plant and other

interfacing departments and compiles them. Various MIS reports consist of

Production targets

Approval of production plan*

Checking Deviations from plan

Plant Maintenance

Monitoring production Raw Material Availability (RM Dept.)

43

44

daily production reports, monthly reports and yearly reports they are sent

to the management.

5. FEATURES OF PRODUCTION PLAN 1. Production plan is based on the idea of producing the maximum with

available raw material and production capacity of plant.

2. Day- to-day production is planned according to raw material

availability.

3. Daily production plan is prepared and likewise annual plan is also

prepared.

4. Day wise production plan is monitored.

5. Production plan is always flexible.

6. PLANTS AT UDYOGAMANDAL DIVISION 1. Ammonia plant

2. Ammonium Sulphate plant

3. Ammonium Phosphate plant/ FACTAMFOS

4. Acid Plant

6.1. Ammonia plant

The capacity of the Ammonia plant is 900 TPD. The investment for the

plant was about Rs.618 Crores. The plant has economy scale size and

employs state of Art technology for the process engineering and control

systems.

6.2. Acid Plants

6.2.1. Sulphuric acid plant The Sulphuric acid plant is designed to produce 1000 TPD of

monohydrate. The plant is based on the double conversion, double

absorption process and was designed by FEDO in collaboration with Davy

power gas Plant.

6.2.2. Phosphoric acid plant The Phosphoric acid plant is designed to produce 360 TPD of P205 through

the dehydrate route. The plant designed by FEDO in collaboration with

Messer society de prayon of Belgium employs the prayon convertible

process to give a product having strength of 30% P205. A separate

concentration section is provided to concentrate this weak acid to strong

acid having strength of 45% P205.

6.3. Ammonium phosphate Plant

The complex fertilizer plant was designed to produce quantities of N P K

fertilizers of various grades. FACTAMFOS Consists of NPK and S in the

ratio 20:20:0:13.

7. PRODUCTS 1. Ammonium Phosphate/ FACTAMFOS

2. Ammonium Sulphate

3. FACT urea

4. Muriate of potash

Products TPD (in MT) TPA (in MT)

NP 20:20

(FACTAMFOS) 450 1,60,000

Ammonium Sulphate 667 2,10,000

Sulphuric Acid 1150 3,38,570

Phosphoric Acid 100 18,000

TPD-Tonnes per day TPA-Tonnes per annum

Table No: 5

45

46

8. OPTIMIZATION OF PRODUCTION The company is making all efforts to optimize production and reduce

losses. Steps are being taken to enhance the procurement of sulphuric

acid as well as phosphoric acid. Steps are also being taken to explore the

possibility to import sulphuric acid.

9. ADHERENCE TO ISO IMPLEMENTATION Do what you write or write what you do

1. FACT has a well defined procedure for production. So according to ISO

implementation it writes whatever it does.

2. Production standards are also kept as per ISO standards.

10. CHALLENGES OF PRODUCTION DEPARTMENT

1. Raw material scarcity is upsetting the entire production plant.

2. Working capital shortage is affecting the smooth functioning.

Around the globe, 2008 has witnessed acute shortage of raw materials and

various natural resources affecting various industries badly. Sulphur

prices over the year have gone up 10 times and 5 times in case of naphtha.

However, LNG can be substituted for naphtha which again is witnessing

an acute shortage. Some raw materials like Rock phosphate and Sulphur

are being imported, which again invites shipping problems for FACT being

its demand for raw materials is in low quantity.

In addition Fertilizer industry is being looked upon as a sick industry, even

from the government side. The subsidy is not given by analyzing the real

situation.

MAKETING DEPARTMENT

1. GENERAL INFORMATION Fertilizer Marketing is different from other product marketing. Fertilizer

has a high demand. Therefore, it can be termed as a seller’s market.

However, its demand is seasonal and is very much dependent on the

Monsoon. Market penetration is very difficult, and once a company

captures a market its brand is substituted for the product. The brand

image plays an important role. The whole market is also dependent on

farmer’s awareness about fertilizers. All of these call for a planned

marketing effort and huge requirement of funds to meet the seasonal

demand of fertilizer.

2. OBJECTIVES 2.1. Monitoring of sales & distribution

2.2. Study & respond adequately to the information from market research

department and from field establishment

2.3. Liaison with bulk buyers, central and state government officials and

officials of fertilizers association of India

47

3. ORGANISATIONAL CHART OF MARKETING DEPARTMENT

C.Ag-Chief Agronomist AM-Area Manager

Chart no: 9

DIR (Marketing)

GM (Marketing)

AM (TN) AM (KL) AM (KAR) AM (AP)

CM Sales CM Distribution C.Ag. Agronomy

48

4. FUNCTIONS OF MARKETING DEPARTMENT

1. Sales

2. Market Research

3. Agronomy

4. Preparation of sales report

5. Processing and sending replies to audit queries at the divisional level

6. Liaison with bulk buyers, central and state government officials and

officials of fertilizers association of India

7. Sales force motivation through internal and external training

programmes

The marketing department consists of various sub departments organized

on the basis of their function. They are:

1. Sales Department

2. Distribution Department 3. Agronomy

4.1. SALES DEPARTMENT The sales department is headed by a Chief Manager who is responsible for

sales coordination of function across various depots, conduct an effective

market research for analyzing market and calculating the demand and

finally promote the sales of FACT products. FACT today holds major

market share in Kerala, 11% in Karnataka and 6% in other states.

4.1.1. Main products

1. FACTAMFOS/Ammonium Phosphate

2. Ammonium Sulphate

3. FACT Urea

4. Muriate of potash

49

4.1.2. Sales Promotion Tools of FACT FACT over the years have innovated various techniques of sales promotion.

Many of them are recognized as effective tools of promotion by national

and international agencies. These techniques are mainly grouped into two:

1. Mass Communication Techniques

2. Personal Contact Method

Mass Communication Techniques

This method involves catering to a large number of people in the shortest

time possible. Advertisement are done through Films, Exhibition ,

Radio jingles, Hoardings, Posters, Farmers awareness programmes in AIR,

Wall Painting, Advertisement , Direct mail service etc.

Personal Contact Methods

As the name implies, in this method, more personal and closer contact

with farmers are developed through promotional methods. The methods

adopted by FACT are through Demonstrations, Block demonstrations, Soil

testing, Seminar, Study classes, Co-operative training programmes, Dealer

training, Squad programmes etc.

Realizing the importance of bringing the essential agricultural inputs and

facilities for advisory service under single roof, FACT has converted its

major selling points into Agro Service Centres rendering service to farmers.

These centres advise the farmers on modern farm management

techniques, credit availability, marketing prospects etc. It also prepares

detailed farm plans for each farmer according to his agriculture pattern.

FACT is the pioneer in fertilizer education and sales promotion programs.

These consist of fertilizer festivals, study classes, seminars, Krishi Vigyan

Kendras (KVKS), crop campaigns, crop demonstrations etc., with an ideal

blend of information and entertainment to drive home the message of

balanced fertilizer use for increasing crop production. The creative and

novel education programs like village adoption of FACT have gained

national recognition.

4.2. DISTRIBUTION DEPARTMENT

Physical distribution of products is a major function of the marketing

division. Chief Distribution Manager is entrusted with planning,

monitoring and implementing of product distribution and co-coordinating

the movement from production units and ports. Marketing operations of

FACT in respect of fertilizers follow a completely centralized pattern. The

marketing network of FACT is spread over the southern states of Kerala,

TamilNadu, Pondichery, Karnataka and Andhra Pradesh. In each state

there are 4 area office and 16 regional offices. The distribution network

consists of 100 Agro Service Centres, 50 field storage points and over 7900

retail selling points in these states, and serves the farmers by the supply of

fertilizers and agronomy advice. Through innovative farmer education and

fertilizer promotion programmes, FACT has created awareness about

scientific cultivation and fertilizer use.

The states offices are called area and their sub- divisions are called

regions.

Areas Regions

Kerala Alleppy Palakkad Kottayam Kannur

Tamil Nadu Coimbatore Trichy Madurai Vellore

Karnataka Mangalore Bangalore Belgaum Hospet

Andhra Pradesh Hyderabad Vijayawada Kakinada Nellore

Table No: 6

50

MARKETING OPERATIONS

AGRO SERVICE CENTRES 100

SWC / CWC POINTS 43

SOIL TESTING LABORATORIES 3

AREA & REGIONAL OFFICES 20

FIELD SALES OFFICES 100

DEALER POINTS 7759

Table No: 7

4.2.1. AGRONOMY DEPARTMENT Fertilizer sales are highly dependent on farmer’s awareness on modern

techniques of farming by using fertilizer for high productivity. Awareness

creation involves an elaborate and well-planned farmer education and

fertilizer promotion program, which in turn calls for a multiplicity of

activities. Chief Agronomist has overall charge of the agronomy

department, which renders technical guidance, and supervision of all

agronomy services.

5. PROCESS OF MARKETING DEPARTMENT

Start here

Chart no: 10

Calculating Requirements

Market Research

Agronomy

Finding the depots

Sales Report

Selling Product

Distribution

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52

Market Research department takes care of collection, analysis and

interpretation of data pertaining to fertilizer market and preparation of

product wise, month wise and annual sales plan for each area. Agronomy

prepares the farmers to buy fertilizers. The sales department monitors and

reports competitor's sales and collects, scrutinizes, analyzes and compiles

region wise and area wise sales of performance and purchased products

for providing information to management on achievement against the

target. The distribution department finds out the various depots as per the

information given by sales and sells the products and subsequently sales

report is prepared.

6. Marketing research Marketing Research Department is essential for the success of marketing

function. The main function of marketing research is the collection,

analysis and interpretation of data pertaining to fertilizer market.

6.1. Functions

1. Preparation of product wise, month wise annual sales plan for each

area.

2. Publication of annual report of division

3. Monitoring and reporting of competitor's sales as per performa

prescribed

4. Collection, scrutiny, analysis and compilation of region wise, area wise

sales performance of own and purchased products for providing

information to management on achievement against the target on a

daily basis.

5. Submission of monthly performance report of the division to the CMD

6. Ensuring product availability, dispatch monitoring and inventory

control

7. Submission of various statements to FAI for publication in their

fertilizer statistics yearbook.

53

7. Performance of the Marketing Division during the financial year 2006-2007 as compared to the financial year 2005-2006.

The overall performance of the marketing division was satisfactory. The

financial performance of the division during the year 2006-2007 has been

seriously affected by the unprecedented increase in the cost of raw

materials compared to last year. FACT also had a decrease in the sales

when compared to the last sales. Sale of FACTAMFOS during the year was

11.93% which is less compared to that of 2005-2006. Total sales for the

year was 9, 47,004 MT compared to 9, 83,001 MT during 2005-2006. The

decrease in sales was 35,997 MT, i.e. 3.66% compared to 2005-2006. The

FACTAMFOS sales decreased from 7, 89,257 MT to 6, 95,104 MT during

the year i.e. a decrease of 94,153 MT which corresponds to a decrease of

11.93% during the year. Urea, Ammonia sulphate, MOP and mixture sales

shows an increase in sales compared to last year. About 3,407 tons of

Biofertilizers (Azospirillum, Rizobium, and phosphobactor) were sold

during the period a decrease of 52.28% when compared with last year

sales (2005-2006).

8. CHALLENGES OF MARKETING DEPARTMENT 8.1. Improper Subsidy policy

Govt. Subsidy policy does not take into account the technology used

for production & cost of raw materials, and comes to the organization

after a long gap after actual sales, which leads to acute shortage of

working capital.

8.2. Lack of fund for research activities

8.3. Narrow product range

8.4. Unnecessary intervention of state and central governments in

distribution & sales

8.5. Recurring losses have put the organization on the back foot looking

for survival in the present than long term plans & resulting research,

leading to low level of research activities and narrow product range.

SALES TURNOVER

Year Quantity ( lakh tones ) Sales

Subsidy Value

( Rs lakhs ) Total

1988-1989 11.58 27,614 15,126 42,740

1989-1990 8.99 20,902 14,128 35,030

1990-1991 10.75 26,705 17,360 44,065

1991-1992 11.02 33,628 24,047 57,675

1992-1993 10.72 44,011 12,649 56,660

1993-1994 11.25 48,204 10,878 59,082

1994-1995 12.02 63,4111 9,990 73,401

1995-1996 13.30 77,260 7,897 85,157

1996-1997 11.10 68,158 9,890 78,048

1997-1998 12.61 81,249 15,166 96,415

1998-1999 12.09 89,690 11,586 101,276

1999-2000 13.16 98,800 27,474 126,274

2000-2001 14.80 111,872 31,422 143,293

2001-2002 12.26 96,841 2,699 99,510

2002-2003 10.45 71,643 16,616 88,259

2003-2004 7.78 46,051 15,236 61,287

2004-2005 7.84 53,117 19,712 72,829

2005-2006 9.83 69,671 36,578 106,249

2006-2007 9.47 67,196 40,216 107,412

Table no: 8

54

QUALITY CONTROL DEPARTMENT

1. OBJECTIVES OF QUALITY CONTROL 1.1. Customer satisfaction through excellence in quality of production and

services

1.2. Adherence to documented quality system

1.3. Promoting quality culture among employees

1.4. Continuous improvement in the quality Management System

2. ORGANISATIONAL CHART OF THE DEPARTMENT

Mgr (Q.C)

Chemist

Shift-In Charge

Lab Assistant

Chart no: 11

3. FUNCTIONS OF QUALITY CONTROL 1. Quality checking

2. Process control assurance

3. Pollution control

4. QUALITY CONTROL PROCESS 4.1. Quality checking

Raw material-Pre and post despatch check. It is usually done by FACT

Quality control cell or external agency if expertise is required.

55

56

Product Quality check

Byproduct Quality check-only in case of byproducts sold

[R & D counter checks quality]

4.2. Process control assurance The samples are tested in the Lab. There is one Main Lab for UD division

and Sub Labs for each plant.

4.3. Pollution control By taking air and water samples. If samples contain more than required

level of effluent, then the matter is reported to the plant manager, Quality

department and GM (UC)

5. POLLUTION CONTROL MEASURES

5.1. Hydrocarbon-detectors are placed in vulnerable areas in the plant for

transmission to control room.

5.2. Computerized automatic ambient air monitoring system is placed at

stations, inside the plant and two in the township to monitor ammonia,

carbon monoxide, non-methane hydrocarbon, sulphur dioxide and oxides

of nitrogen on a continuous basis.

The company continues to give top priority to pollution control activities. It

has already invested lot of money especially for setting up pollution control

plants at Udyogamandal, Cochin and petrochemical divisions. FACT

Udyogamandal, Cochin Division are ISO 14000 certified units. As a

commitment to humanity, the company has taken all necessary

safeguards to prevent water and atmosphere pollution caused by effluent

gases and liquids thrown out from the factory. The company could

maintain all effluent parameters within limits as prescribed by the

statutory authority. Treated liquid effluent and gas emission from plants

57

conform to the Kerala State Pollution Control Board norms. The guidelines

specified by Kerala State pollution control board are followed in the

disposal of all hazardous wastes generated. The ambient air quality

monitoring stations continuously monitor the level of pollutants like

sulphur dioxide, Oxides of Nitrogen, Ammonia, Carbon Monoxide,

Hydrocarbons and Suspended Particulate matters.

6. ACTIVITIES CARRIED OUT

1. Reduction of air pollution from amophus plant and phosphoric acid

plants

2. Improving the quality of effluents on a continual basis

3. Minimize dust problem in sulphur handling and prevention of sulphur

spillage to river

4. Reduction of contamination of raw effluents with vapour condensation

from Hyam plant

5. Reduction of noise level in SO2/Acid plant main air blower

6. Reduction of SO2 emission during start up of sulphuric acid plant

7. Minimize and recycle waste water from phosphate plant and sulphuric

acid plant

8. Improving housekeeping in phosphate and sulphuric acid plant

7. CHALLENGES TO QUALITY CONTROL

7.1. Lack of expertise to handle raw materials quality checking

7.2. Aged machinery

Effluent discharge likely to exceed the permissible limit

High noise pollution

58

RESEARCH AND DEVELOPMENT

1. GENERAL INFORMATION

FACT began research in a modest scale in 1962 with just four scientists.

Over the years this nucleus has grown in to a full-fledged but compact

integrated division with a team of about 12 personnel. The division is

recognized by the ministry of science and technology for in house research

and by the ministry of environment and forests, Govt. of India. R&D plays

a vital role in giving the company and its products the cutting edge in a

competitive environment.

FACT’s well-equipped R&D section has advanced facilities equipped with

pilot plants, modern equipment and accessories. It is backed by a team of

highly motivated research scientists. Various processes have been

developed and patented by FACT R&D division of which several have been

commercialized successfully. Field trials on slow release fertilizers

developed by the division have been successful. Production of bio-

fertilizers has commenced with an installed capacity of 150tonnes per

annum. FACT R&D division has got modern and sophisticated laboratory

and the facilities are continuously expanded and updated. A wide variety

of tests conforming to Indian and international standards are carried out.

FACT R&D division has a unique mobile laboratory equipped with state of

the art instruments for monitoring, assessing, computing and recording air

data.

FACT has won Indian Chemical Manufacturers Association award twice for

outstanding performance in Development of technology & Export of

technology.

2. OBJECTIVES To carry out in-depth research, to provide specialized services to other

divisions of the organization, and is involved in the production of

environment friendly biofertilizers.

3. ORGANISATIONAL CHART OF R&D DEPARTMENT

Mgr (R & D)

Asst Mgr

Officer

Staffs

Chart no: 12

4. FUNCTIONS OF R & D DEPARTMENT 4.1. Quality assurance /Quality control cell

As per the directive from Ministry of Agriculture, Government of India, a

Quality control cell has been set up in R & D centre, for efficient

monitoring of quality of fertilizer products at the dispatch and selling

points.

4.2. Bio-fertilizer research and development FACT has set up a 150 TPA bio-fertilizer plant at R&D premises. The plant

was commissioned during the end of 1999, to take up the production of N-

fixing Biofertilizers like Rhizobium, Azospirillum and P-solubilising bio-

fertilizer like Phosphobactor. The carrier material employed is exfoliated

vermiculite.

59

60

The Biofertilizers plant at R & D centre is capable of producing three kinds

of Biofertilizers namely Rhizobium, Azospirillum and Bacillus Megatherium

under the trade name BIO-FACT. Owing to the short shelf life, production

of these Biofertilizers is based on specific demands of marketing Division.

Efforts are underway to changeover to a new carrier material called Lignite

that conforms to the recently laid down FCO regulation.

4.3. Quality maintenance of product at various depots across the states

Corporate Quality Survey

FACT is committed to provide quality products to consumers. As a part of

this strategy, FACT R&D Centre has been entrusted with checking the

quality of fertilizer samples from production divisions. The Quality check is

usually period wise; sometimes surprise visits are also conducted.

4.4. Consultancy work especially for clients such as Govt. of India

Nyrip Process FACT & IIT Chennai have signed an MOU for setting up of pilot plant to

produce fiber reinforced polymer matrix composites from caprolactum and

carrying out scale up studies. Pilot plant studies at IIT Chennai are

continuing. This project has been funded by planning commission, Govt. of

India under Technology mission programme.

5. ACTIVITIES CARRIED OUT

1. Development and filed testing of slow release fertilizer

Slow fertilizer release R&D Centre of FACT has formulated slow release fertilizers in order to

increase the efficient use of plant nutrients. The slow release fertilizer

project has been selected for partial funding under PATSER scheme by

61

DSIR, New Delhi, for, Agronomical evaluation by Tamil Nadu Agricultural

University, Coimbatore and Kerala Agricultural University, Trichur.

Presently a collaborative project between FACT and Tamil Nadu

Agricultural University for agronomic evaluation of these slow release

fertilizers on cotton and turmeric is underway. A field trial on field is going

on at Coimbatore, under the supervision of FACT marketing division.

2. Recovery of sulphur from the waste sulphur muck of sulphuric acid

plants

3. Utilization of the by-products of the company for value addition

4. Corporate quality survey of our products from Udyogamandal and

Cochin Division to ensure quality of products as per FCO and also to

reduce nutrient loss.

5. Pollution monitoring in factory premises and in ambient air in

Udyogamandalam, Ernakulam, Wellington Island and Ambalamugal to

ensure emission are within the limit.

6. Rock phosphate Characterization

R&D centre is having a bench scale Rock Phosphate testing facility,

which is approved by MMTC. Management has constituted a technical

committee for Rock Phosphate evaluation. R&D Centre conducts

analysis and pilot plant studies for outside parties and MMTC.

6. BENEFITS DERIVED

1. During the year 2006-07, R & D centre has produced 3.91 MT of Bio-

fertilizer and supplied to various Agro service centres and thereby

meeting the entire requirement of the Marketing Division.

2. Functioning of quality control cell enabled to maintain good quality of

products and to reduce considerably the P205 loss due to extra

nutrient content in NP 20:20

62

7. ENVISAGED ACTIVITIES 1. R & D centre plans to conduct research to know the effect of particle

size of vermiculite, a carrier material, on the growth of Bio-fertilizer

inoculants

2. R & D centre plans to conduct studies on the incorporation of Zinc as

Micronutrient in NP fertilizers

3. Development and field testing of suitable Biofertilizers for the acidic

soil especially of Kerala

4. Development of liquid fertilizer solution

5. Development of a closed circuit pollution free process for the

manufacture of weak nitric acid

8. EXPENDITURE ON R & D

Details of expenditure on R & D are given separately.

Expenditure on R & D

Rs. in Lakh

Year Capital Revenue Total As % of Turnover

2004-2005 0.00 31.85 31.85 0.026

2005-2006 0.00 31.17 31.17 0.022

2006-2007 0.00 29.77 29.77 0.020

Source: annual report 2007-08

Table No: 9

63

FIRE AND SAFETY DEPARTMENT

1. GENERAL INFORMATION

As per the factory’s ACT 1948, any organization with more than 1000

employees or for Industries classified as Major hazardous unit (MHU) by

the Govt. of India, requires a safety department.

FACT has well established safety departments to look after the needs of

respective divisions. It is the firm policy of the company that no operation

is so important and no job is so urgent that one cannot find time to

perform it safely. Further, it aims to see that an employee remain as

healthy as he entered the plant, by providing safe environment and safe

working conditions, safe tools and procedures to carry out all operations.

2. OBJECTIVES

2.1. To ensure safety of the organization and of its employees and to act

under emergency

2.2. Train the employees for ensuring safety and to prevent accidents.

98% of the accidents are due to unsafe conditions. Therefore, they are

avoidable and only 2% accidents are unavoidable. The department aims at

avoiding unsafe condition and reducing unavoidable accidents.

3. FUNCTIONS 1. Training Activity

2. Checking compliance with the safety measures

3. Acting in case of emergency

4. ORGANISATIONAL CHART OF THE DEPARTMENT

JGM (UD)

Mgr (Safety)

Inspectors

Assistants

Mgr (Fire)

Inspectors

Fireman

Chart no: 13

5. PROCESS IN FIRE & SAFETY DEPARTMENT

5.1. Training 5.1.1. Taking safety measures by training

Employees: Permanent as well as contract workers is trained to adhere to

the safety measures. Office staff is also given necessary training to react in

case of emergency and about the preliminary precautions to be taken

during their stay in the organization premises.

Barge operators: Barge transports hazardous materials like phosphorous

and sulphur through the inland water ways. Operators are trained to

handle raw materials with care and ensure their own personnel safety.

Lorry drivers: Training is given on handling hazardous materials while

transporting.

Plant operators: Training is given to plant operators, to act in case of

emergency and in handling safety equipments.

5.1.2. Emergency action (safety drill)

Mock drills are conducted for employees and for Fire team to improve the

operational efficiency.

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65

5.2. Checking compliance with safety standards 5.2.1. Departmental Inspection

Inspectors are posted to production sites and premises on shift basis. They

continuously monitor the safety measures taken and checks for deviation.

The maximum permissible limit for each chemical in the environment,

working condition & noise pollution level is checked.

Ammonia 25ppm

So2 2ppm

Chlorine 2ppm

Noise: maximum 115 db -3 mts from machine. Permissible 90-105 db

When any deviation from the above said level is noticed then inspectors

inform the matter to the concerned plant manager or department head. If

the deviation is beyond the permissible limit, then production/process is

stopped and resumes only after the defects are cleared.

5.2.2. Measurement with sensors

Plant has inbuilt systems to measure deviations and is reported to the

control room and safety department.

5.3. Acting in case of emergency 5.3.1. If major problems are detected, then either the whole plant is stopped or

part of the plant is stopped.

5.3.2. In case of fire or smoke:

Built in safety mechanism inside the plant generates automated

extinguisher spray to put off the fire or excess smoke. If the fire could not

be stopped by automated system the fire department starts their action.

The fire crew consists of 1 inspector, 4 firemen & 1 driver

6. SAFETY MEASURES 1. Bringing up all levels of working to a correct safety attitude through

training and interaction

2. Safe production by prompt attention on built-in- safety or integrated

safety

66

3. effective effluent treatment system in operation to render it harmless

before letting it out of the factory

4. in addition to the safety department prevalence of safety committee is

set up to promote active participation at all levels which meets once

in two months

5. Housekeeping inspection committee is set up to inspect the whole

factory area at least thrice in a year and decides inter departmental

housekeeping awards

6. A safety manual highlighting safety practices/ instruction is

distributed among employees as guideline

7. Routine plant inspection by safety fire staff and other staff in the line

function notices unsafe condition to take corrective measures

8. Display of safety cartoon or caution boards at important locations

9. Preparation of valuable information of safety and distribution among

employees

10. Organizing and conduct of mock drills based on onsite emergency

plan to further improve upon the emergency plan

7. CHALLENGES OF FIRE & SAFETY DEPARTMENT 7.1. Aged plant and machinery:

7.1.1.1. Prone to fire

7.1.1.2. Modern control precaution and control of fire through

installation of sensors is not possible

7.2. Maintenance of safety equipments

7.2.1.1. Safety equipment brought with lowest coating bid

7.2.1.2. Constant need to renew safety equipments

67

COMPUTER SERVICE DEPARTMENT

1. GENERAL INFORMATION

The computer department of fact was launched in the year 1965, with the

introduction of first generation computers in finance to meet the growing

need for the speedy data processing. This multi system computer

department is constantly updating its hardware and software. They started

online computing in1986.The centre is equipped with servers in all its

divisions connected by FACT NET. A complete implementation and

interlinking of various departments were completed in 2004.

2. OBJECTIVES 2.1. To keep the management abreast of the fast paced technological

changes in the field of information technology and recommending

timely enhancements of the IT resources in the enterprise.

2.2. To project FACT into the promising area of e-commerce as soon as the

technology is adopted in a big way in the Indian business sector.

3. FUNCTIONS OF COMPUTER DEPARTMENT 1. Planning and procurement of computer systems in all divisions

2. Software development and system support to all divisions

3. User training on computer awareness and applications

4. Maintenance of FACTNET connecting all divisions

5. Process data and prepare relevant information for various levels of

management for appropriate and speedy decision making

6. Prompt and efficient services for meeting information requirements of

the employer, payment of wages and settlement of claims

7. Access control of data between and within department

4. ORGANISATIONAL CHART OF COMPUTER DEPARTMENT

Chart no: 14

Chief Manager

Dy. Chief Manager

Staffs

System administrator

Manager

5. Process Flow In Computer Department

Diagram No: 1

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69

Today, CSC is equipped with Divisional database servers (SUN Enterprise

250) at each of the 3 production divisions and around 700 PC nodes. The

computing nodes are connected via WAN (Wide Area Network) at inter

divisional level through 64 Kbps/ 2Mbps BSNL leased lines / fibre optic

link and Ethernet LAN (Local Area Network) at department level. A

corporate Intranet on Windows NT platform provides e-mail access to

officers, besides hosting web pages containing daily updates of key

production and financial figures. Major applications are on INGRES

platform and being migrated to Oracle 8.

The On-line Integrated Information System (OIIS) that links all the

functional areas of the enterprise had been jointly developed and

implemented by M/s Tata Consultancy Services and CSC. The integrated

system, which runs on Oracle-8i database platform optimizes business

processes of the enterprise and provides information for decision-making.

Main modules of Online Integrated Information System (OIIS) are

finance, human resource, production, traffic/logistics, Maintenance,

Materials, Marketing and sales. Major software systems in the organization

are developed and maintained in-house by the skilled workforce at CSC.

6. ENVISAGED ACTIVITIES 1. Upgradation of WAN and LAN through OFC (optical fibre cable) by

2009

2. Web based connectivity for OIIS across various depots

3. Real time information transfer across depots to head office

7. CHALLENGES OF COMPUTER DEPARTMENT 7.1. Alarming rate of employee turnover

7.2. The online integrated system is not web based at present. Hence there

is no online connectivity with depot.

1. HUMAN RESOURCE DEPARTMENT

2. GENERAL INFORMATION Human resource management is one of the most complex and challenging

fields of endeavor. It is considered to be the most expensive and important

resource of every organization. In FACT the scope of Human Resource

Department is very vast.

3. OBJECTIVE OF HR DEPARTMENT 3.1. To maintain the optimum manpower required to sustain the growth of

Organization.

3.2. To motivate & manage human resource and train them to ensure their

personal and organizational development.

4. ORGANISATIONAL CHART OF HR DEPARTMENT

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Chart no: 15

CM (IR)

CM (Est.)

GM (HR)

CMD (F.A.C.T)

CM (Trg)

CM (Welfare)

CM (Legal)

CE (Ind. Eng.)

Mgr (Public Relation)

DGM (Admin)

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5. FUNCTIONS OF HR DEPARTMENT 1. Organizational human resource planning & development

2. Retirement & selection

3. Wage & Salary administration

4. Employee records maintaining

5. Performance appraisal

6. Welfare programme

7. Job evaluation

8. Handling employee grievances

9. Handling the legal issues within & outside the Organization

6. PROCESS OF HR DEPARTMENT The human resource department has 3 blocks which are:

1. Establishment

2. Industrial relation

3. Welfare

6.1. Establishment Section The main functions are:

1. Recruitment & selection

2. Transfer, rotation and placement of employees in consultation with

divisional heads

3. Wage and salary administration

4. Performance Appraisal

5. Retrenchment

6.2. Industrial Relation Industrial relation operates only within the Organization. The Inter-

organizational relation is handled by the corporate cadre. 60 to 70 % of

management time is lost in resolving IR issues. Therefore the H.R

department is of paramount importance.

The main functions are:

1. Communication between management and trade unions

2. Grievance handling

3. Settlement of dispute

4. Handling disciplinary action

5. Safeguarding Employee rights

6. Career related issues like promotion, transfer & rotation

7. Resolving daily petty issues

6.3. Welfare Welfare schemes can be divided into Statutory, Agreement, Voluntary and

Incentives

The main objective of welfare measures is to maintain healthy working

environment and raise the standards of living of employees which create

harmony to the society and finally to the organization. FACT has always

maintained very healthy welfare measures.

Statutory scheme Agreement scheme

1. Employee’s state insurance 2. Provident fund and miscellaneous

provisions act, 1952-exempted scheme in FACT-FACT employees provident fund trust.

3. Payment of gratuity Act, 1972 4. Kerala labour welfare fund board

rules, 1975 5. Industrial employment (standing

orders) Act 1946 6. Factories Act, 1948-Covers

(Health, safety, welfare)

1. Family relief fund 2. Superannuation benefit fund 3. Family pension scheme of company 4. Retirement benefit fund 5. Employee’s welfare fund 6. Transport subsidy 7. Local travel expenditure 8. Subsidized bus service facility 9. Special vehicle loan 10. Uniform & footwear 11. Leave travel concession 12. Evening snacks 13. Children’s education allowance 14. Interest subsidy 15. Free tea-twice a shift 16. Production incentives 17. Leave & holidays

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Voluntary Scheme Incentives scheme

Table No: 10

1. Contributory health scheme 2. Group personnel accident insurance scheme 3. Aid towards funeral expenses 4. EX-gratia payment for accident deaths 5. Gratuity payment-company scheme 6. Vehicle loan 7. Work clothes 8. Rain coats & Umbrellas 9. Free milk supply 10. Supply of coconut oil, soaps, and towel 11. Conveyance allowance for physically

handicapped 12. Special Tiffin for fire and safety personnel 13. Laundering of special clothes 14. Sports & Recreation 15. Lalith kala Kendra 16. Fact employee’s consumer cooperative

society 17. Fact employees housing cooperative society 18. School facilities 19. Company accommodation

1. Incentives for employees acquiring higher qualification while service

2. Incentives to promote Hindi 3. Incentive to promote family

planning 4. FACT merit award 5. FACT service award 6. Attendance bonus 7. Suggestion scheme 8. Incentive for blood donation 9. Incentives to promote sports &

players 10. Merit scholarship scheme for

employee’s children

7. INDUSTRIAL ENGINEERING

The main objective of this section is to make effective utilization of the

manpower resources and restructure it for the benefit of the organization.

The main functions are:

1. Manpower planning that compose of Manpower audit & Forecast

future requirements

2. Custodian of manpower inventory

3. Work study

a. Removing system bottlenecks

b. Production incentive etc.

4. Maintenance scheduling

5. Work environment study

6. Employee problem analysis

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8. ADMINISTRATION WING The wing is headed by DGM and maintains orderliness in internal affairs

of the department. The main functions are:

1. Checking the performance of each department

2. Consolidating the reports of different HR sections

3. Act as a linking chain between different sections

4. Office and admin work of HR department

9. LEGAL SECTION The department looks after the Legal affairs of the organization. It is

entrusted with the duty of handling cases within and outside the

organization in which the company is involved.

10. SOME KEY INFORMATION

10.1. RECRIUTMENT POLICY

The Recruitment policy is done as per prescribed recruitment specification

with proper authority appointed by B.O.D. The following are the sources of

recruitment.

1. Confirmed employees within the division or company

2. Employment exchange as per provisions of Employment Exchange Act

3. Employees on deputation from Govt. of India

4. Casual labours who were initially taken after employment exchange

5. Transfer from public sector undertakings

6. Apprentices who completed training in FACT

7. Dependents of deceased employees who died in service

8. External source

10.2. PERFORMANCE APPRAISAL

Performance Appraisal in FACT started in 1962. In 1984, the system was

further revised to include potential assessment, assessment of training

needs and performance counseling.

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The main functions are: 1. Self Appraisal for all management employees

2. Reporting and receiving officers specified for each level of appraisal

3. Assessment by the Assessment Committee

4. Grading on the basis of assessment

5. Communication of final rating to employees formally

6. Provision for appeal by employees formally

10.3. WORKERS PARTICIPATION IN MANAGEMENT

FACT is one of the pioneer industrial undertakings, which initiated action

to promote worker participation in management. Even as early as 1959,

when FACT had only one division, the idea of having the active association

of employees in various aspects of productive operations in true

participative spirit, creating a climate of involvement and commitment in

order to motivate the work force to enable the work force to contribute

their best to the sustained growth and prosperity of the organization was

in the mind of management. It was with this idea that a Joint Council,

Shop Council and Joint Labour Management Action Groups were formed.

11. MANPOWER OF FACT

As part of cost reduction measures, from 1998 onwards FACT reduced its

employee strength. FACT had more than 9000 employees earlier, but it is

now reduced to less than 4000 employees by the successful

implementation of VRS. FACT has several divisions, which all together

consist of 3817 employees now. The following table shows the division

wise employee strength of FACT during April - 2008

Division wise Staff Strength - April -2008

Non managerial Managerial Total

Division Strength Avg.

age

Strength Avg.age Strength Avg.age

HO 116 47 209 49 325 49

UD 994 46 294 49 1288 47

CD 828 50 310 52 1138 50

PD 466 45 204 47 670 46

FEDO 28 48 71 49 99 49

FEW 23 50 22 50 45 50

Marketing 145 49 107 48 252 49

Total 2600 47 1217 49 3817 48

Table No: 11

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77

TRAINING DEPARTMENT

1. GENERAL INFORMATION

The training and development activities of the company have been

centralized with effect from April 2004. With this arrangement, the

management development centre (MDC), the training centres of Cochin

division, Udyogamandal division and Petrochemical division have been

centralized into one department called FACT Training Centre.

Centralization was effected with a view to:

1.1. Utilize all resources efficiently and to ensure more productivity

1.2. Identify the training needs of all employees based on a uniform

approach and imparting required training

Training Centre of FACT has started job-oriented courses in Fire & Safety

Engineering. New courses in Heavy Equipment operation & maintenance,

Welding technology and Process Plant operation are being organized. These

courses are planned to be offered in association with Governmental

agencies and statutory bodies. The objective is to convert the training

centre in to a “Skill Development Academy” with a view to provide facilities

for skills development and making educated youth employable.

2. OBJECTIVES OF TRAINING 2.1. To identify training needs of the employees as a whole on the basis of

uniform criteria

2.2. To impart required training, which equip the employees consisting of

officers and workers of the company with knowledge and skill,

required for improved performance

2.3. To meet training needs with specific reference to ISO 9001:2000 and

ISO 14001:2004 standard requirements

2.4. To maintain a database of training details and development activities

3. ORGANISATIONAL CHART OF TRAINING DEPARTMENT

CM (Training)

Mgr (TRG)

Officer (TRG)

Instructors

Staffs

Chart no: 16

4. FUNCTIONS OF TRAINING DEPARTMENT Training Centre is involved in four broad functions:

1. Training officers and workers of the company as a whole in identified

areas

2. Meeting the obligation of Apprentice Act 1961/1973

3. Facilitating post qualification training, in plant training and project

work to students

4. Facility for employees to attend external training programmes

5. TRAINING PROCESS 5.1. Identification of training needs, trainees & programmes

5.1.1. Department-wise identification of people to be trained

5.1.2. Suggestion of programmes by department head

5.1.3. Final selection of programmes by training department

5.1.4. Preparing detailed programme schedule by training department

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The training activity plan prepared is generally for a period of three years

i.e. one cycle. During the period, the plan may however be revised. At least

7 different programmes are conducted in a cycle.

Identifying People to be trained

Prepare Training plans

Facilities Methods

Identification of training need

Measure and analyze Results

Impart Training

Trainers Programmes

Validate Evaluate

Identifying the training Programmes

Feedback

Chart no: 17

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80

5.2. After the training plan is prepared, the programmes, facilities, method of

conducting and trainers are identified. Non-technical training programmes

are conducted in FACT Training hall at the Training Centre.

5.3. Imparting training In FACT, there are two methods of training for employees. The method of

training is decided on the basis of requirements.

5.3.1. On the job training

This is specific to the job and concentrates on imparting knowledge and

skill to the concerned employee. Induction training include introduction of

an employee to the organization and job by giving him all the possible

information about organization’s culture, climate, objectives, policies,

practices, products etc. In job instruction training, necessary instructions

about the job are given by the concerned superiors. Instruction manual is

also supplied for the same and it helps the employees to deal with work

conditions. Job rotation is another on the job training in which an

employee made to move from one job to another at certain intervals. Job

rotation in FACT is intradepartmental, interdepartmental and inter-

divisional. Intra-departmental job rotation is done within the departments

so that all employees are exposed to different functions carried out in their

departments. Workers employed to different plants are rotated among the

plants at periodical intervals. These rotations give skill and knowledge to

the employees in different jobs.

5.3.2. Off the job training

This method is employed to impart knowledge and skills in the employees

in general areas which enable them to perform the job better. The main

objective of this programme is personality development such as leadership

quality, communication skills, attitude change etc. These methods consist

of lectures, conference, group discussions, case studies, role playing and

transactional analysis. Off the job training is carried out with the help of

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internal or external faculty on the basis of their availability and suitability.

Examples of programmes conducted by internal faculty are fire fighting

training, employee development programme, fire and industrial hygiene,

safety etc. Some of the external organizations which provide training

programme in FACT include National Productivity Council, Confederation

of Indian Industries, National Safety Council and Regional Labour

Institute. Some of the technical programmes conducted are innovative

approach in industrial pollution control, instrumentation and energy

conservation of boiler operations and maintenance of bearings.

Apart from the training conducted at training centre for the employees &

students there are external training conducted for the corporate cadre

managers i.e. for chief Managers and above. External training programs

are mostly conducted outside FACT.

5.4. Feedback

The important aspect of training is feedback since it checks the validity

and effectiveness of training. Feedback is usually obtained department

wise from the department heads, prepared by the immediate supervisors of

the trained employee. The change in work behavior or general behavior

forms the feedback.

6. CHALLENGES TO TRAINING

6.1. Improper feedback

6.2. Improper selection of employees from the various departments

6.3. Limited time available due to the pressure of production targets

VIGILANCE DEPARTMENT

1. GENERAL INFORMATION

Vigilance is an integral part of the management function. The department

is a statutory requirement for all public sector companies. The Department

in FACT is headed by a chief vigilance officer (CVO).The incumbent CVO is

an IPS or IAS officer. He or she possesses the status rank and perquisite of

a functional director. Under him/her there are two Chief Managers from

vigilance department posted at FACT head office at Udyogamandal.

2. OBJECTIVE

To act as a policeman and deter fraud or any unscrupulous activity in the

organization and to punish such activity when takes place, thereby,

creating an environment of mutual trust and fair play in the organization.

3. ORGANISATIONAL CHART OF VIGILANCE DEPARTMENT

Chart no: 18

The CVO has the power of dual reporting either to the CMD or directly to

CVC of Govt. of India.

CVO (FACT)

Chief Manager

DY Chief Manager

Inspector

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4. FUNCTIONS OF VIGILANCE DEPARTMENT

4.1. Acting on complaints

4.2. Inspecting high value files

4.3. Maintaining transparency and accountability of jobs

4.4. Department-wise monitoring of frauds and malpractices

5. PROCESS FLOW CHART

Chart no: 19

Vigilance Notice boards have been installed in all the offices all over the

company displaying the address and telephone numbers of the CMD, CVO,

and CVC. These authorities can be approached on complaints of

corruption. They can be accessed by e-mail also.

Start here Start here

Dept-Wise monitoring for frauds and malpractices

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5.1. Acting on complaints

Anonymous and pseudonymous complaints are not taken cognizance of

survey of employees suspected of indulging in corruption is undertaken

YES

NO

Take action

Inspecting high value files

Fraud Detected

Receipts of complaints

Suspicious Actions

Acting on complaints

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and on getting reliable information their names are included in the agreed

list for keeping a close vigil on their activities.

5.2. Suspicious action of employees

The names of employees who are charge sheeted in the court in a

corruption case or have been punished or likely to be punished in

departmental proceedings on charges of corruption and irregularities are

included in the list of officers of doubtful integrity. Both the lists are sent

to the CBI for keeping a watch on the activities of listed employees.

Employees are also monitored if suspicious actions are detected.

5.3. Inspecting High value files

Some of the high value files are:

1. Files of high financial importance such as Budgeting and payroll

2. Susceptible Files: E.g. Stores accounting.

3. Files of importance. E.g. Raw material procurement, traffic of

materials

4. Adherence to policies: Transfer, promotion, awards, incentives given

to employees

5. New projects & development related activities

5.4. Actions taken

The cases of fraud charged against a department or an employee is

circulated throughout all departments which act as a deterrence to

malpractices for fear of being caught.

If the case involves above Rs. 25 lakh, then the case is handed over to the

CBI. The CBI can also take over the case from the department if

paramount importance has been attached to the case. An employee is

suspended from service during the period of trial and if found guilty from

the court of law, then he or she is terminated from service considering the

gravity of the case.

COMPANY SECRETARIAT

1. GENERAL INFORMATION Company secretariat is a statutory requirement for all companies having

more than Rs. 2 Crores worth assets.

2. OBJECTIVE To carry out the company affairs as directed by the Board of Directors and

to act as a link between B.O.D and the company.

3. ORGANISATIONAL CHART OF COMPANY SECRETARIAT

Chart no: 20

CMD (FACT)

Company Secretary

Officer

Staffs

Asst. Secretary

4. FUNCTIONS 4.1. To act as the principal officer of the company

4.2. Carries out Board Director’s instructions

4.3. Public information officer complying with Right To Information

Act(RTI Act)

4.4. Compliance or adherence to the legal requirement of the organization

4.5. Supervision of share transfer/depository agents

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Chapter 5

Functional Interdependence of Departments

86

Computer Centre

R & D Quality Check

Vigilance

FUNCTIONAL INTERDEPENDENCE OF DEPARTMENTS

Diagram No: 2

HUMAN RESOURCE MANAGEMENT

Fire & Safety

87

1. Finance & Materials Finance department procures fund for production and accounts for it.

With these funds materials are brought. During purchase the company

has to enter into contract, give letter of credit and other necessary

documents, which is done by the finance department. The traffic section of

the materials department helps the finance department in rising of fund by

providing a link in production and marketing its products. Finance

department plays a major role in vendor development by opening the bids

and deciding the feasibility of vendors.

2. Marketing, Materials and finance Marketing department sells the goods and raises the fund required by the

finance department. Materials department transports the goods for the

marketing department.

3. Finance and Production

Production targets are made on the basis of finance budget which checks

the economical feasibility of the plan and finance budget cannot prepared

without knowing the production plan.

4. R & D and production R & D researches new technology for decreasing the production cost, and

further by its manufacture of Biofertilizers.

5. Quality, Marketing and R & D Quality preserves the customers delight by ensuring the quality of goods

sold. R & D counter checks the quality. R & D further goes to the depots

and check the products whether it reaches the market safely with quality.

6. H.R

H.R department ensures the development of human resource and its

productive utilization by directing it in the right channel.

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7. Computer service centre The department enhances inter-departmental and intra-departmental flow

of information and speedy data processing. Data access is controlled

within and between departments. Constant updating is done to catch up

with the modern developments.

8. Fire & Safety It operates all over the organization to ensure its safety and quickly

responds to emergency cases.

All departments are interdependent and interrelated to each other for their

functioning. One department cannot operate without the absence of the

other. The performance of the company depends on the interdepartmental

functioning rather than the department wise functioning.

Chapter 6

Corporate Social Responsibility

89

CORPORATE SOCIAL RESPONSIBILITY

Some of the measures taken by FACT as a part of its Corporate Social

Responsibility are:

1. Dealer Network

The dealer network plays a very crucial role in marketing of fertilizer in the

country. In most cases dealer, not only gives the fertilizer but also imparts

substantial knowledge and information on the use of fertilizer and

improved agricultural practices.

2. Community Awareness

Community awareness programs on safety, pollution control measure in

plants, onsite emergency plan and so forth are being carried out through

the public relations department.

3. Social welfare The company has implemented the reservation policy of the government of

India for scheduled castes and scheduled tribes as well as for the other

backwards classes. It is presently employing 1855 SC/ST/OBC employees,

and has been actively implementing the special recruitment drive for the

employment of SC and ST. Consequent to this drive; the company has

been implementing the directives of the government of India on reservation

for other backward classes.

4. Hospitals

There are two full-fledged hospitals, one each at Udyogamandal complex

and Ambalamedu respectively. These hospitals provide both inpatient and

outpatient treatment to the company employees who are members of the

contributory health scheme. The hospitals also extend their service to

those who are not members.

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5. School Schools are established both at Udyogamandal complex and at

Ambalamedu. Schools provide free education to the children of company

employees and on payment basis to children of neighboring public sector

employees and for general public. The curriculum ranges from ICSE, Plus

2 and SSLC.

Chapter 7

Environmental Analysis

91

Environment Analysis

1. INTERNATIONAL SCENARIO Around 95 percent of the fertilizer produced in the world is used for farm

crop. Fertilizers include both natural and artificial substances that

increase the productivity of agricultural land. It is clear that the rapidly

growing population of the world will increasingly depend on commercial

fertilizers for its food and fiber.

The world’s leading fertilizer producers are the Soviet Union and United

States. Other leading producers are China, Canada, France and India. The

world’s leading producer of phosphate rocks is the United States. The

Soviet Union and Morocco has the largest resources phosphate rock. The

largest deposits of potassium chloride, the major source of potassium

fertilizer, occur in Canada and Soviet Union. The fertilizer industry of the

United States is organized into separate segments for producing and

marketing Nitrogen, Phosphate or Potash intermediaries and products.

Some European countries are following the elemental system, N and K and

it is likely that rest of the world will adopt this system.

2. NATIONAL SCENARIO

India is one of the world’s largest producers and consumer of both

phosphorous and nitrogenous fertilizers. The pesticide in the country is

also among the fast growing sector in the world. There are around 25

chemical fertilizers used in the country at present.

The total fertilizer capacity in India is 12.02 million tonnes in nutrient

terms, and consumption was is 13.05 million tones. Roughly a sum of

Rs.130 million has been the total investment in this industry.

The problem of the industry is the seasonal demand for its product and

large working capital requirements. The Govt. of India has implemented

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and commissioned major fertilizer projects in 1998-1999 and invested

4122.02 crores. They will add 9.75 lacks of DAR (Di-ammonium phosphate

and one lack tones of NP).It is unfortunate that fertilizer industry has been

a victim in the recent past under the controlled piercing subsidy regime of

the Government.

1. Government is contemplating complete decontrol in phased manner by

2006-07.

2. Quantitative restrictions on fertilizer imports have been removed since

April 1, 2001.

3. The implication of present policy environment for fertilizer sector in

India is not promising. There are possibilities that domestic

production and consumption of fertilizers may decline.

4. The policy considerations which are likely to be implemented may

result in making the domestic production of fertilizers unviable.

5. At present there is no demand-supply gap in urea.

6. A switch over in feed stock from naphtha to LNG for urea is envisaged

depending on its availability and price.

7. High energy cost does not permit further expansion in urea capacity

within the country. Joint ventures abroad are likely to be developed.

8. For phosphate and potash also, joint ventures abroad are likely to be

developed as there is no potential reserve within the country.

3. STATE SCENARIO

Kerala has high degree of land use and cropping intensity. The state’s

agricultural productivity is decreasing year by year. The production and

cultivation of rice is decreasing and the farmers are concentrating on

commercial crops like rubber and coconut. Due to the decrease in the

cultivation of rice, the consumption of nitrate and potash has come down.

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Kerala has one of the lowest consumption of fertilizer in the country per

hectare of land area. FACT has the major market share in Kerala. To gain

the market share FACT is planning to increase its marketing programs in

several areas of the Kerala state.

4. COMPETITORS OF FACT

SPIC- Southern Petrol Industrial Chemicals (Products-Urea, di-

Ammonium Phosphate and intermediaries)

MFL- Madras Fertilizer Ltd. (products-NPK 17:17:17 and variants Vijay

urea, Biofertilizers, Agro Chemicals).

NFL- Nagarjuna Fertilizer Ltd. (Products-Urea)

MFL- Manglore Fertilizer Ltd. (Products-Urea, Complex Fertilizers)

RCF- Rastria Chemicals Fertilizers Ltd. (Products-Urea, di-ammonium

phosphate, MOP, Complex fertilizers)

IFFCO- Indian Farmers Fertilizer Co-operative (Products-Urea, Ammonium

phosphate and complex fertilizer)

Chapter 8

SLOT Analysis

94

SLOT ANALYSIS OF FACT

1. STRENGTH 1.1. High capacity utilization.

1.2. High quality products. FACTAMFOS is a premium product in complex

fertilizer containing Sulphur

1.3. Sustained operating parameters of the plant at good level and

productivity of plant at good level

1.4. Well-qualified and technically skilled manpower

1.5. Good support with farmers/end segment

1.6. One of the two producers of Caprolactum in India with world-class

quality

1.7. ISO Certification to most of the divisions

1.8. Strong dealer network in South India

1.9. Good engineering and consultancy design, perhaps one among the

best in Indian Fertilizer segment

1.10. FEDO has own process know-how for hydrogen, Sulphuric Acid,

Ammonium Sulphate, DAP and complex fertilizers

1.11. FEDO has worked in association with many international process

licensors, and has acquired the capacity of customizing and designing

projects to the requirements of the Indian consumers.

1.12. FEDO is an approved center of surveyors and audit for portliness,

installation, non-destructive testing energy audits, ISO audits and so

on.

2. LIMITATIONS 2.1. The government controls the prices of finished goods, but the prices

of raw materials are uncontrolled. So it is forced to operate in an

uneconomic situation

2.2. The average age of employee is very high (49 Yrs). The number of

younger professionals is decreasing and some managerial personnel

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are forced to handle more than one position due to freeze on

recruitment.

2.3. Lack of product line diversification

2.4. Lack of working capital resources

2.5. Several unskilled jobs, which could be sub contracted are undertaken

by the permanent employees at high cost

3. OPPORTUNITIES 3.1. Less expensive alternative sources of energy and other inputs

3.2. Acquiring technology to utilize other available resources

3.3. Expanding production capacity to drive benefits of scale

3.4. FACT ammonium sulphate has greater demand in foreign countries

3.5. Opportunities for product diversification

3.6. Very large asset base

4. THREATS 4.1. Unfavorable policy of the Government

4.2. Diminishing market for Caprolactum

4.3. Infiltration of more fertilizer products to the southern markets from

other producers

4.4. Inherent bottlenecks in infrastructure facilities

4.5. Lack of product differentiation

4.6. High pricing and scarcity of raw materials

4.7. Severe liquidity crunch leading to non-operation of plant at higher

capacity

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CONCLUSION

About FACT

FACT is the pioneer in fertilizer production which paved the way for

increased productivity in agricultural sector. It started with a vision to

become a dependable global player in agriculture and provide self reliance

in engineering and technology especially in fertilizers. With this vision it

navigated through all difficulties which came on its way in the initial

stages of growth. Setting up of R & D centre was an envisaged activity to

keep abreast with the latest development, especially for Biofertilizers

manufacture.

With commercialization of its production at Udyogamandal, it began its

expansion stage to Cochin division and finally to petrochemical division.

But the reigning period of FACT came to an end with the scarcity and

skyrocketing prices of raw materials. It could hardly do anything to save

its declining trend as the product pricing is done by the Govt. of India. The

show case example has been the drift of the company to loss even after

making a record production in 1999-2000.

Today, the organization runs at loss and is short of working capital. The

working capital crunch has stopped most of its envisaged activities. The

organization as of now is stagnating and is in a difficult stage of

production. The immediate impact is seen in its low funding to R & D

department, reluctance in adopting new technologies, revising the

corporate plans to the bare minimum targets and reduction in welfare

measures of the company. The trend has badly affected its market share

and has stepped behind in competing with its contemporary organizations.

However, even in this tragic situation, the company is operating above 90%

capacity utilization. The management and its staff are putting their best to

97

sustain the company. Trade unions are cooperating with the management

by understanding the company’s situation and responding to its need.

The future however looks bright when the opportunities and strengths of

the organization are considered. FACT’s real strength is its experienced

employees who have tasted the different stages of its growth. Further, it

tries to acquire new technology for cutting the cost of production.

Government’s new policy on subsidy may rewrite the history of FACT.

About the study

FACT is divided into 3 main divisions – Udyogamandal division (UD),

Cochin division (CD) & Petrochemical division (PD). This study was

conducted at Udyogamandal division. FACT has 12 main departments and

are interdependent on each other as shown in Organizational chart (Chart

No 1) & Diagram 2.

The study was conducted with a view to understand the functions of FACT

and its department. During the course of study I was successful in

achieving these objectives and could familiarize with an organization and

its environment.

This study has improved my confidence by its successful completion to

undertake such studies in the future.