It gives me immense pleasure to present to you the 43rd Annual Report for the year2016-17.
Economic Environment & Fertilizer Industry
The country is set to witness economic growth a leap forward through various reforms /initiatives undertaken by the Indian government including Make in India Goods andServices Tax (GST) Bankruptcy Code Digital India Skill India etc. Further theDe-Monetization decision of the Government during the year had resulted in ample liquidityin the system at reduced lending rates for investment in infrastructure.
Apart from above increase in Foreign Direct Investment due to above reforms/initiatives of the Gol shall further boost the economic growth and employment in thecountry.
Regarding Agro economy the foodgrain production in 2016-17 has touched a new record of273.4 million tonnes i.e. 8.7 percent higher than last year. Further waiver of loans offarmers and technological interventions like e-trading of agriculture produce by variousstate governments are likely to make favorable impact in the growth of agricultureeconomy.
Fertilizers sector being highly energy & capital intensive cost of fertilizers isunavoidably high. At present Urea prices are highly subsidized and administered under NewUrea policy-2015 whereas P & K Fertilizers are partially decontrolled and subsidy isdisbursed based on the nutrient content available in the particular fertilizer underNutrient Based Subsidy introduced by Gol w.e.f. 01-04-2010.
The country as a whole achieved Urea production of 24.20 Million tons during 2016-17marginally lower than record Urea production of 24.50 Million tons made during 2015-16.Under 'Make in India' initiative of the Government all out efforts are being made torevive the closed Urea plants in the country in a time bound manner which shall not onlyreduce the dependence on imports but also make the country self-reliant in Urea.
The introduction of pooling of gas mechanism in the year 2015-16 has been consistentlyhelping ensuring delivery of gas at uniform and lower price to Fertilizer companies toenable them to make Urea production beyond re-assessed capacity and helping to contain therequirement of working capital to some extent.
During 2016-17 due to higher production and lower consumption of Neem Coated Ureathere has been a significant cut in Urea imports in the country by over 3 million tonnesi.e. 5.5 Million tons against 8.5 Million tons imports in 2015-16. Consequent to thefavorable Urea policies notified by Gol during 2015-16 the availability position of Ureain the market remained quite comfortable and probably no shortage of Urea was felt by thefarmers during 2016-17.
Implementation of Direct Benefit Transfer of subsidy in Fertilizers sector byGovernment of India through POS devices is in full swing. After the pilot projects in 16districts it is now being rolled out across the whole country. This would ensure toreduced leakage of subsidized fertilizers and there by reduce government's subsidy burdenreleasing resources to plough back into agriculture in a way that can help a greaternumber of poor and marginal farmers.
Maintaining the growth momentum your Company has performed exceedingly well during theyear 2016-17. The Company has achieved the ever highest Urea production of 38.10 LMT withan overall capacity utilization of 118% during 2016-17 surpassing the previous bestproduction of 37.99 LMT achieved during 2015-16. Your company is second largest domesticproducer of Urea with market share of 15.5%.
On the sales front the company achieved ever best sale of Fertilizers of39.75LMTincluding record sale of37.58 LMT of Urea 2.14 LMT of imported DAP (ever best) and0.03 LMT of Bentonite Sulphur against previous best of 36.91 LMT during 2015-16 whichincluded 36.41 LMT of Urea and 0.50 LMT of DAP.
During 2016-17 the company recorded ever best sale of Nitric Acid of 67949 MTsurpassing previous best of 54559 MT during 2015-16. Besides this 9293 MT of AmmoniumNitrate was also produced & sold during 2016-17 after resumption of its production inApril 2016 at Nangal Unit after a gap of around 2 years. The company sold 545 MT ofBio-Fertilizers (Solid & Liquid) to the tune of Rs. 2.39 crore as against 530 MT ofRs. 3.01 crore during last year. There has been a surge in fertilizers import business ofthe company during 2016-17. The company imported and sold 214000 MT of DAP and 3000 MT ofBentonite Sulphur worth Rs. 660 crore during 2016-17 as against 52000 MT of imported andindigenous DAP & Bentonite Sulphur worthRs. 173 crore during 2015-16.
During the year Company achieved turnover of Rs. 7663.22 crore (including subsidy ofRs. 4958.15 crore) compared to Rs. 7793.91 crore of the CPLY (including subsidy of Rs.5430.64 crore). Despite higher sale quantity of Urea by 1.17 LMT as compared to CPLY thedecrease in sales turnover is mainly due to lower subsidy on Urea by Rs. 660 crore mainlydue to fall in gas price to USD 8.04 / MMBTLJ during the year as compared to USD 9.96 /MMBTU during CPLYi.e. decrease of 19.28%.
Company earned profit before tax ofRs. 324.88 crore (CPLY Rs. 288.42 crore) and profitafter tax of Rs. 208.16 crore (CPLY Rs. 198.62 crore). The increase in profit is mainlyattributed to increase in contribution from sale of Urea beyond re-assessed capacityincrease in profit from traded goods decrease in finance cost increase in contributionfrom Industrial products decrease in energy consumption decrease in depreciation chargesetc. There has been an adverse impact on the profitability of the company during the yearmainly due to increase in marketing expenses due to oversupply situation in the market.
The financial results of 2016-17 are the first financial statements of the companyunder Indian Accounting Standard (Ind AS) a transition from previous Generally AcceptedAccounting Principles (GAAP) to Ind AS which has affected the company's financialposition financial performance and cash flows.
Owing of shift in strategy of the company the composition of gross sale of the companyhas undergone visible change. Against the Urea (main product) contribution of 94.49% inthe overall revenue of the company during 2015-16 Urea contribution has reduced to 88.31%while contribution of non-Urea business including production & sale of industrialProducts & certified seeds sale of imported fertilizers and trading of certifiedseeds agro chemicals etc. under single widow concept has increased to 11.69% during2016-17.
Agriculture Extension Services
NFL is organizing Agriculture Extension Services with the objective to educate farmerson judicious use of fertilizers along with technical knowhow on improved and scientificmethods of cultivation enhancing farmers' knowledge about latest developments in farmingsector thus helping them to increase productivity. It is essential to educate the farmerson issues related to soil testing soil health balanced fertilization etc. to optimizefarmer's crop yield and farm income. 84 farmer training programmes were organized during2016-17 and more than 5000 farmers benefited. During the year 2016-17 87 and 85demonstrations of Bio Fertilizers and City Compost respectively were carried out atfarmers field to demonstrate the effect of Bio Fertilizers and City Compost on crop growthand yield as compared to farmers' own practices. Under the Government of India'sinitiative Company has opened 100 Kisan Suvidha Kendras (KSKs) in various locations inits marketing territory. The company has also upgraded its Soil Testing Labs at Barabankiand Nangal by installation of Atomic Absorption Spectrophotometer (AAS) for micronutrientanalysis. The company also undertook analysis of more than 27000 soil samples for Macroand Micro Nutrients to enable farmers for balanced fertilization.
The Company considers its Human Resource as its most important asset and makessustained efforts for the development of its manpower. Company has a well-establishedHuman Resource Department to cater to the training needs of employees keeping in view thechanging technology and overall business environment.
The Company had a manpower strength of 3517 employees as on 31-03-2017 which comprisesof 1663 Executives and 1854 NonExecutives. The company promotes the employment of womenand at present 202 women employees are on its roll which is 5.74% of the total workforce. The detailed analysis with regard to human resource including training incentivesand development programmes has been made in the Management Discussion and Analysis Report.
To improve skills and instil behavioural and personality development traits in allsupervisory staff and managerial cadre NFL organised number of training programmes(in-house as well as external) on contemporary subjects during the year. The trainingprogrammes were identified through Performance Management System by synchronizingorganizational needs with individual needs. The Company also organized specially designedtraining programmes for developing women employees in various areas of expertise. In thesediverse programmes 11180 man-days training was imparted to employees and 569man-daystraining to women employees.
The industrial relations at all Units / Offices of NFL remained cordial. CSR Activities
The Company continues to involve in meaningful welfare driven initiatives throughCorporate Social Responsibility that distinctively impact the quality of life in society.During the year 2016-17 the Company incurred an expenditure of Rs. 261.77 Lakh towardsCSR activities. The company has undertaken projects in the area of Health &sanitation cancer awareness distribution of artificial limbs aids & appliancesskill development especially for women & youth and provision of ambulances in remoteareas of Arunachal Pradesh etc.
In addition to above under company's flagship CSR programme 10 villages 5 each inHaryana and M.P have been adopted to demonstrate and encourage the use of city compostwhich is an organicfertilizer.
Safety Environment and Sustainable Development
During the year the Company has undertaken various initiatives for adopting bestpractices for health safety environment management and sustainable development.
In order to monitor the level of emission and effluent discharge from all the unitsall the units have installed On-line monitoring system both for effluent and emissiondischarges. Online monitoring system is integrated with Central and State PollutionControl Boards in order to monitor the level of pollutants on continuous and real timebasis.
All the units are having their "Disaster Management Quick Response Team" toaddress the incidents that may occur outside the factory area for transportation of LiquidAmmonia and Chlorine Gas.
Efficiency of Coal fired Boilers at Nangal Bathindaand Panipat Units is being improvedby using various techniques such as use of Coal additives. This will help to reduceconsumption of fossil fuel. Afforestation has been adopted in all the Units to improve theenvironment surrounding the Units. A total of about 20000 tree saplings were planted inand around various Units leaving a cleaner and greener earth for future generation. Thecumulative plantation since commencement is about 8 lakhs for all the units.
To increase the sub soil water level all the units are under process of installationof Rain Water Harvesting system. During the year 5 rainwater harvesting system wereinstalled in Units. This would help in conservation of water increase in undergroundwater table and increase greenery in the surroundings.
Awards and Accolades
I am happy to share with you that during 2016-17 your company has received number ofprestigious awards in different spheres which inter alia include good performance awardfor excellence in Cost Management from institute of Cost Accountants of India (ICAI)Safety awards from Ministry of Labour & Employment and National Safety Council toPanipat Unit for 2014 and 2016 respectively best technical innovation award andEnvironment Protection Award for 2016 to Vijaipur Unit from FAI National EnergyConservation Award 2016 for Panipat Unit from Bureau of Energy Efficiency. In additionour Company also received Rashtriya Rajbhasha Award from Hindi Advisory CommitteeMinistry of Chemicals & Fertilizers and Government oflndia.
The company is focusing on the following areas for achieving growth in its business:
Maximization of Urea production in energy efficient manner.
Production of new products like Bentonite Sulphuretc.
Maximization of production of Industrial Products including Ammonium Nitrate.
Production and sale of quality & certified seeds in own brand name throughseeds multiplication programme.
Domestic trading of Agro products like pesticides compost BentoniteSulphuretc.
Import and sale of fertilizers like Urea DAP MoP and complex fertilizers.
Revival of other closed plants in the country through Joint venture mode.
Setting up of Di-nitro Tetroxide (N204) plant at Vijaipur Unit for M/s ISRO onBuilt Own Operate& Supply (BOOS) basis.
Exploring setting up a DAP and Phosphoric Acid Plant in Algeria in a JointVenture mode and under buy-back arrangement.
Status of New Projects
In order to meet the demand of Bentonite Sulphur and to improve thetop & bottomline company is in the process of setting up a Bentonite Sulphur plant of 25000 MTPAcapacity at Panipat Unit. The job on LSTK basis was awarded in July 2016 with a scheduledcompletion period of 14 months. The project is in progress and expected to be commissionedwithin scheduled time i.e. by September 2017.
The company is also exploring to establish a plant for production of Murate of Potash(MoP) from salt in the Little Rann of Kutch (LRK) region with technical support from M/sCSMCRI Bhavnagar and project consultancy from M/s PDlL.However production of 100 MT ofMoP from pilot plant of CSMCRI is being undertaken before initiating further action to setup MoP plant on commercial scale.
The company is committed to the best practices in the area of Corporate Governance inletter and in spirit and believes that good corporate governance is much more thancomplying with legal and regulatory requirements. Good governance facilitates effectivemanagement and enables company to maintain a high level of business ethics and to optimizethe value for all its stakeholders. Report on Corporate Governance has been brought outseparately as an annexure to the Director's Report. All Directors and Senior Managementofficials have affirmed compliance to Code of Conduct.
I welcome Smt. Meenakshi Gupta Additional Secretary and Financial Advisor Departmentof Fertilizes Shri D S Ahuja Director (Technical) Shri Anil Verma IndependentDirector Dr. Ramesh Kumar Agarwal Independent Director Dr. Kalpana Saini IndependentDirector on joining the Board of the Company and hope that the Company will benefitgreatly from their rich experience.
I will also like to place on record deep appreciation for the valuable guidance andsignificant contributions made by outgoing Directors Shri Gurinderjit Singh Sandhu andShri M. Sagar Mathews.
I also take this opportunity to express my sincere thanks and gratitude to mycolleagues on the Board of Directors for their valuable guidance and support in runningthe affairs of the company.
I am also thankful for the whole-hearted support received by the Company from Dept ofFertilizers Fertilizer Industry Coordination Committee (FICC) Railways and otherMinistries and Departments of Government of India and various State Governments Company'sBankers and Auditors and look forward to their continued support in Company's futureendeavors. In particular I would like to thank all the shareholders fortheir continuedconfidence in the Company.
I sincerely thank the employees of NFL at all levels and would like to place on recordthat without their contribution and dedication the results achieved would not have beenpossible. I expect the same determination and spirit to continue in future to furtherimprove the performance of the company.
|Registered Office: ||(Manoj Mishra) |
|Scope Complex Core3 ||Chairman and Managing Director |
|7 Institutional Area Lodhi Road New Delhi-110003 ||DIN:06408953 |
|Date: 10th August 2017 || |