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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 School
of 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. 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.
1
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.

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Chapter 2

History of FACT
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.
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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.

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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

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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.

6
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.

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Chapter 3

About FACT
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
8
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
9
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

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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
Percentage of
Category Number of shares
shareholding
Government holding
Government of India 345465200 97.38
State Government 2585000 0.72
Sub total 348050200 98.10
Non promoter
holding
Insurance
4026854 1.14
companies
Sub total 4026854 1.14
Others
Private corporate
473597 0.14
Bodies
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

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6. BRIEF PICTURE OF FACT

Fertilizers And Chemicals


Name
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
Palluruthy, cochin
Division FEW

Consultancy Division FEDO Udyogamandal

Marketing Division
Head office Udyogamandal
Trivandrum, Chennai,
Area offices
Bangalore and Hydrabad
Trivandrum, Chennai, Mumbai,
Liaison Offices
New Delhi
South India: Kerala, TamilNadu,
Marketing Territory
Karnataka, Andhra Pradesh

Table No: 3

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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.

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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

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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

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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- 900 TPD Ammonia plant guarantee
09/11/1998- test run
Table No: 4

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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

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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.

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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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 CMD

DIR MARKETING DIR FINANCE DIR TECH C.V.O

GM MARKETING GM HR GM (CP & PC) GM MATERIAL

GM (CD) GM (UC) GM (F&F)

JGM (UD) JGM (PD)

CM CM CM CM CM MAINTENANCE CM FEDO CM FEW CM


SALE DISTRUBUTION AGRONOMY PRODUCTION PURCHASE

KL TN AP KAR CSP CME MGR MGR MGR MGR MGR MGR COMPANY
STORES QUALITY SAFETY R&D TRAFFIC STORES SECRETARY

TRAFFIC AMMONIUM AMMONIUM PHOSPHORIC SULPHURIC AMMONIA PE PE PE


SULPHATE PHOSPHATE ACID ACID
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

20
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

Director (Finance)

DGM (IA) DGM (Finance)

CM (Bills & CM (Sales) CM (Costing, CM (Gen A/c)


Mat) MIS, Budget)

Mgr (IA) Mgr (cash, Bank Mgr (Tax &


& Payroll) Duties)

Chart no: 1

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
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

22
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.
23
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.

24
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
25
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

26
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.

27
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

28
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

GM Material

CM Purchase RM

Dy. CM
Raw Materials
Mgr E.S.S Mgr F.F.T.S Mgr Stores Mgr Traffic

Chart no: 2

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
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
30
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

Purchase Vendor Bid evaluation Entering into


Requisition Development & Financial Contracts
Concurrence

Purchase order
Raw material
requirement
Raw material
Transporting

Raw Materials Raw material Inspections


Payment
Department Storing

Production
Plan
Chart no: 3

CHALLENGES TO RAW MATERIAL PROCUREMENT


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
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:

32
User Department Raw material Payment Inspections
Requirement Procurement

Material
Validating Procurement
Requirement

Despatch Purchase order


Purchase
Requisition
Entering into
Contracts

Bid evaluation
YES Available NO Vendor
at stores & Financial
Development
Concurrence

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

33
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

34
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.

35
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


Inventory
Receiving Inspecting Holding Management

Disposal Issue
Chart no: 5
36
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.

37
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

38
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.

39
Depot Transportation
Marketing division

Despatch information MDA Issue

Traffic department Signed MDA Weighing

Payment
Vendor (Transport) Vehicle in slip issue Loading

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

40
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

41
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

JGM (UD)

CM (Production)

MAINTENANCE
Production

C.M.E C.S.P

Traffic Ammonium Ammonium Ammonium Sulphuric Phosphoric


Sulphate Phosphate Acid Acid

Chart no: 7

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

Production Plant
targets Maintenance

Approval of Checking Deviations


production plan* from plan

Raw Material
Availability (RM Monitoring production
Dept.)

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

43
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.

44
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
450 1,60,000
(FACTAMFOS)

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
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.

46
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

3. ORGANISATIONAL CHART OF MARKETING DEPARTMENT


DIR (Marketing)

GM (Marketing)

CM Sales CM Distribution C.Ag. Agronomy

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

C.Ag-Chief Agronomist AM-Area Manager


Chart no: 9

47
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

48
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

49
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

Market Research Sales Report

Agronomy Selling Product

Finding the depots Calculating Distribution


Requirements

Chart no: 10

51
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.

52
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.

53
SALES TURNOVER

Subsidy
Quantity
Year Sales Value Total
( lakh tones )
( Rs lakhs )
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)

Shift-In Charge

Chemist

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
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
56
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

57
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.

58
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
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
60
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

61
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

62
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

63
4. ORGANISATIONAL CHART OF THE DEPARTMENT

JGM (UD)

Mgr (Fire) Mgr (Safety)

Assistants

Inspectors 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.
64
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
65
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

66
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

67
4. ORGANISATIONAL CHART OF COMPUTER DEPARTMENT

Chief Manager

Dy. Chief Manager

Manager

System administrator

Staffs

Chart no: 14

5. Process Flow In Computer Department

Diagram No: 1

68
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.

69
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

CMD (F.A.C.T)

GM (HR)

DGM (Admin)

CM CM CM (Est.) CM CM CE (Ind.
(Welfare) (IR) (Legal) (Trg) Eng.)

Mgr
(Public
Relation)

Chart no: 15

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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.

71
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 1. Family relief fund


2. Provident fund and miscellaneous 2. Superannuation benefit fund
provisions act, 1952-exempted 3. Family pension scheme of company
scheme in FACT-FACT 4. Retirement benefit fund
employees provident fund trust. 5. Employee’s welfare fund
3. Payment of gratuity Act, 1972 6. Transport subsidy
4. Kerala labour welfare fund board 7. Local travel expenditure
rules, 1975 8. Subsidized bus service facility
5. Industrial employment (standing 9. Special vehicle loan
orders) Act 1946 10. Uniform & footwear
6. Factories Act, 1948-Covers 11. Leave travel concession
(Health, safety, welfare) 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
1. Contributory health scheme 1. Incentives for employees
2. Group personnel accident insurance scheme acquiring higher qualification
3. Aid towards funeral expenses while service
4. EX-gratia payment for accident deaths 2. Incentives to promote Hindi
5. Gratuity payment-company scheme 3. Incentive to promote family
6. Vehicle loan planning
7. Work clothes 4. FACT merit award
8. Rain coats & Umbrellas 5. FACT service award
9. Free milk supply 6. Attendance bonus
10. Supply of coconut oil, soaps, and towel 7. Suggestion scheme
11. Conveyance allowance for physically 8. Incentive for blood donation
handicapped 9. Incentives to promote sports &
12. Special Tiffin for fire and safety personnel players
13. Laundering of special clothes 10. Merit scholarship scheme for
14. Sports & Recreation employee’s children
15. Lalith kala Kendra
16. Fact employee’s consumer cooperative
society
17. Fact employees housing cooperative society
18. School facilities
19. Company accommodation

Table No: 10

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.
74
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

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Division wise Staff Strength - April -2008

Non managerial Managerial Total

Division
Strength Avg. Strength Avg.age Strength Avg.age
age
116 47 209 49 325 49
HO

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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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
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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

Identification of training need

Identifying the training Programmes

Prepare Training plans

Programmes Facilities Methods Trainers

Impart Training

Measure and analyze Results

Validate Evaluate

Feedback

Chart no: 17

79
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

80
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

81
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

CVO (FACT)

Chief Manager

DY Chief Manager

Inspector

Chart no: 18

The CVO has the power of dual reporting either to the CMD or directly to
CVC of Govt. of India.

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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

Start here
Start here

Dept-Wise monitoring
for frauds and Receipts of complaints
malpractices

Inspecting high value Suspicious


files Actions

NO Fraud Acting on complaints


Detected

YES

Take action

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.

5.1. Acting on complaints


Anonymous and pseudonymous complaints are not taken cognizance of
survey of employees suspected of indulging in corruption is undertaken

83
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.

84
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

CMD (FACT)

Company Secretary

Asst. Secretary

Officer

Staffs

Chart no: 20

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

85
Chapter 5

Functional Interdependence of
Departments
FUNCTIONAL INTERDEPENDENCE OF DEPARTMENTS

H
U
M
Fire & Safety A
N

R
E
S
O
U
R
C
E

M
A
N
Computer Centre A
G
E
M
E
N
T

R&D
Quality
Check

Vigilance

Diagram No: 2

86
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.

87
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.

88
Chapter 6

Corporate Social Responsibility


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.

89
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.

90
Chapter 7

Environmental Analysis
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
91
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.

92
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)

93
Chapter 8

SLOT Analysis
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

94
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

95
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
96
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.

97