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 C HEMICALS TRAVANCORE LTD. is a bonafide study of Vivek Menon of the third Semeste r MBA student of School of Management Studies at the Cochin University of Scienc e and technology. Place: Date: Dr. Sarada. S 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 CHEMICALS STUDY AT FERTILISERS Ltd. under AND the TRAVANCORE COCHIN guidance of Dr. Sarada. S, Reader, School of Management Studies in partial fulfi llment of the requirement for the award of the degree of Master of business admi nistration is a bonafide study I have done in the organisation. I also declare t hat 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 o ther 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 stu dy 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 wit h her valuable suggestion. She was a source of inspiration for me to complete th e 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 w hich he rendered throughout the study and he was instrumental in shaping this re port this great institution of excellence which has encouraged me to undertake such a n 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 s cience 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 p art of the MBA curriculum at the school of management studies of the Cochin Univ ersity of Science and Technology. The study was conducted to understand the structure, function and processes of v arious departments and their interdependence. During the course of study I was a ble to successfully interact with the employees of the organization. They were h appy to give me all possible information. They also took me to the plants and wo rksites where I got the first hand information functions. about the organization al processes and its The methodology consists of data collection through interview, observation and l iterature review. The data collected from different sources are classified, anal yzed and interpreted. Based on which an organizational structure, its functions and various departments are identified. The various departmental functions are c learly identified and their processes & activities carried out are recorded. An in-depth analysis is made us to understand the departmental process based on whi ch a process chart is prepared. The analysis further formed the basis for identi fying the departmental interdependence. The study further revealed some of the c hallenges faced by the

departments. The study helped us to obtain an exact picture of FACT based on whi ch, a slot analysis is done. Finally, with the help of latest statistics availab le from the organization, the present trend and current scenario of FACT is clea rly revealed.

LIST OF CHART, TABLES AND FIGURES Chart Chart No. Particulars Page No: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Organizational chart Organizational chart of Finance department Organizational c hart of Materials department Raw Material procurement process Equipment and spar es procurement process Process flow in stores department Process flow in traffic department Organizational chart of production department Production process Org anizational chart of market department Process chart of market department Organi zational chart of quality control department Organizational chart of R & D depar tment Organizational chart of fire & safety department Organizational chart of c omputer division Organizational chart of HR division Organizational chart of tra ining division Training process chart Organizational chart of vigilance departme nt Vigilance department process flow Organizational chart of company secretariat 20 21 29 31 33 36 40 42 43 47 51 55 59 64 68 70 78 79 82 83 85

Tables Table No. Particulars Page No: 1 2 3 4 5 6 7 8 9 10 11 Performance at NSE Distribution of shareholdings Brief picture of FACT Milestone of FACT Products of FACT Areas and regions of distribution Marketing operations Sales turnover Expenditure on R & D Welfare scheme Division wise staff strength 10 11 12 15 45 50 51 54 62 72 76 Diagrams Diagram No. Particulars Page No: 1 2 Process flow in computer department Interdependence of department 68 86

CONTENTS Topic Page No: Certificate from organization Certificate from guide Declaration Acknowledgement Abstract List of figures, tables and chart i ii iii iv v vi Chapter No: 1. 2. 3. 4. About the study History of FACT About FACT Functional de partments 4.1. Finance department 4.2. Materials department 4.3. Production depa rtment 21 29 42 1 3 8

4.4. Marketing department 4.5. Quality control department 4.6. R & D department 4.7. Fire & Safety department 4.8. Computer service department 4.9. Human resour ce department 4.10.Training department 4.11.Vigilance department 4.12.Company se cretariat 5. 6. 7. 8. Functional interdependence of departments Corporate social responsibility Environment analysis SLOT analysis 47 55 58 63 67 70 77 82 85 86 89 91 94 Conclusion Bibliography 96

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 framewor k & its functioning. 1.2. To gain knowledge about different departments of the or ganization and the functions. 1.3. To study the interdependence of different dep artments. 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, i nteractions of employees etc. Work site and plants were visited were the actual process of production and activities of various department were seen and underst ood. 2.2. Data collection 2.2.1. Direct method Through Interview & discussion We interacted with the employees and understood the work and responsibility carrie d 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 Companys internal records, Publication, Annual report, Journal, statutory report, website (official site & others). The data c ollected companys departmental manual added key information to this report and he lp us to understand the process carried by each department in detail. Annual rep orts 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 wa s also given to the organizational guide for correction. 3. LIMITATIONS OF STUDY 3.1. 3.2. 3.3. Time was a major limiting factor. Secondary data available from c ompany manuals were outdated (the manuals are being updated). Lack of co-operati on from certain departments due to their work load. 2

Chapter 2 History of FACT

HISTORY OF FACT Mans history is replete with revolutions, responsible for molding his system of t hought and shaping his modes of living. Revolutions have, more often than not, e merged 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 FERTIL ISER AND CHEMICALS TRAVANCORE LIMITED-popularly known as FACT-was indeed a revol ution 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 consciou sness 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 ne ver ending challenges and constructive responses. The beginning The 1940,s were a time of critical food shortage in our country. The traditional approach to cul tivation was not of much help in finding a solution to this problem. And nitroge nous fertilizer had not yet arrived on the agriculture scene in sufficient quant ities to make any perceptible impact. A revolution was indeed necessary to chang e the status quo. And when it came, it did through the vision of Dr. C.P. Ramasw ami Aiyar, the Dewan of the former Travancore State, who mooted the idea of incr easing 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 Sesha yee Brothers Ltd. Industrialist known for their pioneering work. And Indias 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 produc tion of ammonium salts were not available in the state. But this deficiency was overcome by adopting a revolutionary method known as the FIREWOOD GASIFICATION P ROCESS. 3

However, initial difficulties notwithstanding, the plant at Udyogamandal went in to 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 prod uction of SUPERPHOSPHATE in a new plant with a capacity of 44,000 tonnes. A sulp huric acid plant of 75 tonnes per day was also installed which was considered la rge going standard at that time. Meanwhile the inner dynamics of FACT was findin g another expression in the formation of new unit with the help of the State Gov ernment and Methur Chemical & Industrial Corporation Ltd., for the production of caustic soda which later become todays Travancore-Cochin Chemical Ltd., a Kerala Government undertaking. This indeed was a big leap forward as it replaced all t he imports of that product, saving a considerable amount of foreign exchange. FA CT was the first to use its byproduct, 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 Udyogamandala m Division launched its first expansion with an outlay of Rs. 3 crores. Highligh ts 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 Elec trolytic Process by the Texaco Oil Gasification Process for which a new plant wa s set up. FACT became a Kerala State Public Sector Enterprise on 15th August 196 0. On 21st November 1962, the Government of India became the major shareholder. The 2nd stage of expansion of FACT was completed in 1962. 4

The 3rd stage of expansion of FACT was completed in 1965 with setting up of a ne w Ammonium Sulphate Plant. FACT has been a pace-setter in marketing evolving a c ontinuous and comprehensive package of effective communication with farmers and promotional programmes to increase the fertilizer consciousness among our farmer s. In fact, FACT was the first fertilizer manufacturer in India to introduce the village adoption concept since 1968 to improve agricultural productivity and en hance the overall socio-economic status of farmers. FACT has a well organized ma rking net work, capable of distribution over a million tones of fertilizers. Wit h 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 Pro duction of NPK was commercialized. Technical Divisions FACT Engineering and Desi gn Organization (FEDO) was established in 1965 to meet the emerging need for ind igenous capabilities in vital areas of engineering, design and consultancy for e stablishing large and modern fertilizer plants. FEDO has since then diversified into Petrochemicals and other areas also. It offers multifarious services from p roject 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 accredita tion ISO 9001 2004 for quality system standards covering areas of consultancy, d esign & engineering services for construction of large fertilizer, petrochemical s, chemicals and related projects including purchasing, construction, supervisor , inspection and expediting services. FACT Engineering Works (FEW) was establish ed on 13th April 1966 as a unit to fabricate and install equipment for fertilize r plants. FEW was originally conceived as a unit to fabricate and install equipm ent for FACTs 5

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 di vision has excelled in laying cross country piping fabrication and installation of large penstocks for hydel units in Kerala. The Cochin Division of FACT, the 2 nd production unit was set up at Ambalamedu and the 1st phase was commissioned i n 1973. The 2nd phase of FACT Cochin Division was commissioned in 1976. The proj ect 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, Pho sphoric Acid and Fertilizers like FACTAMPHOS 20-20 and DAP 18-46. FACT has also a Research & development Department which carries out research related to fertil izers. This Division is also capable of doing fundamental research in areas of f ertilizers and chemicals technology. So far FACT R & D has taken 17 patents in a reas like Sodium Fluoride, Sulphuric Acid and Ammonium Phosphate. Breakthrough F ACT took a major breakthrough, when its 50,000 TPA plant of Caprolactum was comm issioned in 1990 as a major diversification plan from our traditional field of f ertilizers and allied chemicals. The plant with a capacity outlay of Rs. 368 cro res 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 invest ment of Rs 618 crores. This replaced the old Ammonia plant of Udyogamandal Divis ion. 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. 7

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 a nd 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 infr astructural facilities. 2. CORPORATE OBJECTIVES well being and growth through the production and marketing of fertilizers and ch emicals and through the acquisitions/development and dissemination of engineerin g technology know-how and skills. 2.1. To be of service to the nation and to contribute effectively to its economi c 2.2. To sustain and improve its pioneering role in the development of indigenous development. 2.3. To improve productivity and maintain high standards of qualit y 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 inve sted and, for itself, development of adequate internal resources for continual g rowth and expansion. 2.5. To actively work for rural uplift through guidance, ad vice 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 ma intain a team of motivated and disciplined personnel with required skills and ab ilities, and to encourage innovation 8 engineering and technology through research and

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 c ompany and its operations, in the society in which it operates, amongst its cust omers 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 crore by the year of 2010 3.1. To achieve a net profit of 200 crore per year with a turnover of Rs.2100 3. 2. To focus on cost reduction and technology up gradation in order to become com petitive in each line of business. 3.3. To constantly innovate and develop new p roducts and services to satisfy customer requirements. 3.4. To invest in new bus iness 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 capturi ng 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 ma jor industrial Organisation, FACT complies with all laws and statutes which gove rn industries in general. 1. 2. 3. 4. 5. 6. Factories Act, 1948 Excise Act, 1944 Sales tax Act, 1959 Industrial Disputes Act, 1947 Employee Staff welfare Act, 1 948 Workmen Compensation Act, 1923 9

7. 8. 9. The Payment of Gratuity Act, 1972 The Payment of Wages Act, 1936 Trade Unions Ac t, 1926 10. Standing Orders Act, 1946 11. Payment of Gratuity Act, 1972 12. Provident Fu nd and Miscellaneous Provisions Act, 195 5. OWNERSHIP PATTERN The Fertilizers and Chemicals Travancore Ltd (FACT), is a Schedule A category Gove rnment of India enterprise, under the administrative control of department of fe rtilizers in the Ministry of Chemicals and Fertilizers. FACT was incorporated in 22/09/1943 and in 1960s the Government of India became the major shareholder. A Board of Directors manage the Organisation. The chairman of the Board of Directo rs 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 list ed at National stock exchange of India (N.S.E) PERFORMANCE OF SHARES AT NSE Mont h April May June July August September October High (Rs) 33.85 34.00 27.50 30.90 27.35 26.80 26.15 Low (Rs) 28.35 27.50 21.25 23.00 21.70 24.70 24.10 10

November December January February March 23.90 24.80 26.85 26.40 23.00 Table No: 1 22.15 21.75 23.75 23.75 20.55 Source: Annual Report 2006-07 DISTRIBUTION OF SHAREHOLDING Category Government holding Government of India Sta te Government Sub total Non promoter holding Insurance companies Sub total Other s Private corporate Bodies Indian public NRIs or OCBs Clearing member Sub total Gr and total 473597 2187434 14316 19573 2694926 3554771974 0.14 0.62 0.76 100.00 40 26854 4026854 1.14 1.14 345465200 2585000 348050200 97.38 0.72 98.10 Number of s hares Percentage of shareholding Source: Annual Report 2006-07 Table No: 2 11

6. BRIEF PICTURE OF FACT Name Slogan Established in the year Location Promoters Production units of Ferti lizers Caprolactum Fabrication Division FEW Consultancy Division FEDO Marketing Division Head office Area offices Liaison Offices Marketing Territory Fertilizers And Chemicals Travancore Ltd (FACT) Pioneers in progress 1944 Udyoga mandal, Cochin, Kerala Government of India Udyogamandal & Ambalamedu Udyogamandal Palluruthy, cochin Udyogamandal Udyogamandal Trivandrum, Chennai, Bangalore and Hydrabad Trivandrum, Chennai, Mu mbai, New Delhi South India: Kerala, TamilNadu, Karnataka, Andhra Pradesh Table No: 3 12

7. DIVISIONS OF F.A.C.T 7.1. Udyogamandal Division FACT commenced operation at Udyogamandal with the com missioning 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 yea r 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 s tandards. 7.2. Cochin Division FACT Cochin Division was set up in the 1970s 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 util izing Indian Engineering skills. A large scale complex fertilizer plant of 485,0 00 TPA was set up as phase-II. Sulphuric acid and Phosphoric acid plant of econo my scale were also set up. 7.3. Petrochemical Division FACT diversified into pet rochemicals in 1990 with the production of Caprolactum. This versatile petrochem ical product is the raw material for the manufacture of nylone-6, which finds ex tensive application in textiles, tyre cord and engineering products. Thanks to i ts high quality, the product has been acknowledged as among the best in the worl d. The division is located adjacent to the Udyogamandal division. Co-product Amm onium Sulphate is transferred to the fertilizer plant of Udyogamandal division f or processing. 13

7.4. FACT Engineering & Design Organization (FEDO) FACT Engineering & Design Org anization (FEDO) was established in 1965 for utilizing the considerable indigeno us plant building expertise accumulated by FACT in its process of nurturing the nascent chemical fertilizer industry. FEDO is today one of Indias premier proje ct engineering organization, catering to a wide spectrum of industries like petr ochemicals, refining, pharmaceuticals, hydrometallurgy etc as well as petroleum storage, environmental engineering, offsite facilities etc. The division underta kes project execution on consultancy and turnkey basis, handling the intricacies of the technology sourcing, design and engineering, hardware procurement and co nstruction with practiced ease. FEDO is ISO 9001 certified. 7.5. FACT Engineerin g Works (FEW) Established in 1966, FACT Engineering Works was originally conceiv ed as a unit to fabricate and erect equipment for fertilizer plants. Over the ye ars, it developed capabilities in the manufacture of Class I Pressure Vessels, H eat 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 Sri. Asokan A. Sri. Vijay Chhibber Dr. Jivtesh Singh Maini Dr. R. Kannan PhD. I.A.S Chairman & Managing Director Director (Marketing) Part-tim e Director (Nominee of Govt. of India) Part-time Director (Nominee of Govt. of I ndia) Chief Vigilance Officer 14

EXECUTIVE DIRECTOR Sri. Venkatakrishnan.S Sri. K. V. Balakrishnan Source: Annual report 2006-07 Exe cutive Director (Finance) In Charge Company Secretary 9. MILESTONES OF FACT 22/09/194326/06/19471959-6015/08/1960196221/11/196224/07/196513/04/196607/06/196 615/10/196601/10/197127/04/197301/10/197310/11/1976Incorporation Production star ted UD-1st stage expansion completed FACT came under public sector4 UD-2nd stage expansion completed Govt. of India became major shareholder6 FACT Engineering & Design Organization FACT Engineering works CD-Phase I License issued UD 3rd sta ge expansion completed UD 4th stage expansion completed CD I, Urea plant commiss ioned UD 4th stage 150 TPD Ammonium phosphate CD-II, Sulphuric acid plant commis sioned 15

10/12/197610/01/197701/04/1979198118/05/198414/09/198406/08/198509/11/198826/07/ 198913/12/198921/09/199020/12/199001/03/199101/03/199122/03/199825/09/199303/11/ 199809/11/1998CD-II, Phosphoric acid plant commissioned CD-II, NPK trial run started CD-II NPK Commercialized 450 TPD Sulphuric acid plant modified to DCDA process PD-Caprola ctum technical collaboration agreement PD-Zero date of ASCC project PD-Caprolact um license issued SO2 Acid plant Commissioned Award for excellence in performanc e FEW shifted to Palluruthy Oleum production commenced CD-12 MW captive power pl ant PD-Caprolactum commercial production started UD-New Ammonium Sulphate Commer cial production started 900 TPD Ammonia plant commercial production started Foun dation stone-900 TPD Ammonia plant 900 TPD Ammonia plant guarantee test run Table No: 4 16

10. PRODUCTS & PRODUCT MIX 10.1. PRODUCTS 10.1.1.Finished products Ammonium Sulphate - Udyogamandal Division Ammonium Phos phate / Complex fertilizers / Factamfos - Udyogamandal Division & Cochin Divisio n Caprolactum - Petrochemical Division Biofertilizers - Research & Development D ivision 10.1.2. Exported Products Caprolactum - Petrochemical Division Ammonium Sulphate - Udyogamandal Division 10.1.3.Byproducts Nitric Acid & Soda Ash - Petr ochemical Division Gypsum - Udyogamandal Division & Cochin Division Carbon Dioxi de Gas - Udyogamandal 10.1.4. Intermediary Products Ammonia - Udyogamandal & Coc hin 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". Th is high analysis fertilizer is 17

found suitable for application especially in Coconut/ Rubber/ Oil Plam/ Tea Plan tation. 10.2.2. Complex Fertilizers Factamfos 20:20:0:15 - NPK complex fertilize r - Factamfos or Ammonium Phosphate contains 20% N in ammonical form, 20% P in w ater soluble form and 15% sulphur; a secondary plant nutrient, which is now atta ining great importance in agriculture. Factamfos also can be used for foliar spr aying. 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 cr ops like Tea, Coffee, Cardamom, Rubber etc. Rose Mixture - A fertilizer tonic fo r 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 dire ct import of MOP and also trading of Imported Urea. Bio fertilizer - FACT produc es and markets N fixing Bio fertilizers Rhizobium, Azospirillium and P solub ilising 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 qua lity of FACT Caprolactum is among the best available in the world. Nitric Acid a nd Soda Ash - Small qualities of these are obtained from Caprolactum plant as by product. 18

Nitric acid (55%) Capacity Concentration (by weight) Ammonium Nitrate (by weight ) Specific gravity at 20 0C Delivery Soda ash (off grade) Capacity Total alkalin ity (as Na2CO3) (by wt) Sulphate (as Na2SO4) (by weight) Bulk density (g/L) Deli very : : : : : 4750 TPA 95% (min.) 1.5 to 3% 1.35 to 1.50 Ex-factory - bulk : : : : : 3800 TPA 55% (min.) 1% (max.) 1.339 Ex-factory - tanker load 19

CMD DIR FINANCE DIR TECH C.V.O DIR MARKETING GM MARKETING GM HR GM (CP & PC) GM MATERIAL GM (CD) GM (UC) GM (F&F) JGM (UD) JGM (PD) CM SALE CM MAINTENANCE CM DISTRUBUTION CM AGRONOMY CM PRODUCTION CM FEDO CM FEW CM PURCHASE KL TN AP KAR CSP CME MGR STORES MGR QUALITY MGR SAFETY MGR R&D MGR TRAFFIC MGR STORES

COMPANY SECRETARY TRAFFIC AMMONIUM SULPHATE AMMONIUM PHOSPHATE PHOSPHORIC ACID SULPHURIC ACID AMMONIA PE PE PE

ABBREVATIONS OF ORGANISATION CHART DIRTECHC.V.OC.PP.CCDUCF & FJGMUDPDCMC.S.PC.M. EMGRP.EDIRECTOR TECHNICAL CHIEF VIGILANCE OFFICER CORPORATE PLANING PRODUCTION C OORDINATION COCHIN DIVISION UDYOGAMANDAL COMPLEX FEDO & FEW JUNIOR GENERAL MANAG ER UDYOGAMANDAL DIVISION PETROCHEMICAL DIVISION CHIEF MANAGER CHIEF SUPERINTENDA NT PRODUCTION CHIEF MECHANICAL ENGINEER MANAGER PLANT ENGINEER 20

Chapter 4 Functional Departments

FINANCE DEPARTMENT 1. OBJECTIVES forecast its requirement in the future and plan accordingly and to check for dev iation. 1.2. Report the financial performance of the company to Management, stak eholders & and to comply with the Govt. rules and regulations 1.1. To Manage & account for the financial resource of the Organization, to 2. ORGANISATIONAL CHART OF FINANCE DEPARTMENT Director (Finance) DGM (IA) DGM (Finance) CM (Bills & Mat) CM (Sales) CM (Costing, MIS, Budget) CM (Gen A/c) Mgr (IA) Mgr (cash, Bank & Payroll) Mgr (Tax & 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 p reparation, Cost accounting, Auditing, Preparation of financial statements & rep orts, Corporate Planning. 21

4. PROCESS OF FINANCE DEPARTMENT Finance department in FACT is divided into five sections for carrying out its pr ocess. They are: 1. 2. 3. 4. 5. Bills & Materials Sales Costing, MIS, Budget Cas h, bank & Payroll and Tax & duties 4.1. BILLS & MATERIALS-The main functions are Stores accounting and Receiving, D ispatch and holding of bills 4.1.1. Bills section Bills section deals with the c ontract account for execution of civil works and other construction/erection, ma intenance and services. It includes: 1. 2. 3. 4. 5. 6. 7. Sale of tender form Re mittance of EMD Remittance of security deposit Issue of materials to the extract ors Receipts to certified bill in the specified format Security on running accou nt bills and final bill Statutory procedures and formalities in works contract 4.1.2. Stores accounting Main functions of stores accounting are: 1. 2. 3. 4. 5. 6. Receipts of stores Issue of stores Returns of stores Value adjustments Recon ciliation with control accounts Unconsumed materials lying at site at the close of financial year 22

4.2. SALES ACCOUNTING Some of the functions are 1. 2. 3. 4. Accountability for selling and distributio n of products & byproducts Recording the transaction Transfer of information fro m depots to HO 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. C ost 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. Co st centre in Ugyogamandal Division Process water, DM water, Steam, CPP, Ammonia, Sulphuric Acid, So2/ Oleum, Phosphoric acid, Pollution Control, Ammonium Sulpha te, Ammonium Phosphate Classification of cost Variable cost-Raw Materials, Inter mediate products, Consumable, Products, Utilities, Packing materials, Pollution control expenses. Fixed cost-Fixed cost of a product mainly consists of conversi on 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 a nd 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 a nd initiating suitable action. MIS Briefly consists of: 1. 2. 3. 4. 5. 6. Divisi onal Reports- Two monthly reports for each division - one for the finance depart ment and another for the GMs office P & L Account-Statement and its analysis Prod uction performance of the division Inventory position Cost of production-Actual and budget for the month Specific information important for the management-Major projects, man-hour utilisation etc. 4.3.3. Budgeting Two types of budget-Revenu e and Capital budget Two types of estimates- Budget estimate and revised estimat e Revenue Budget Every year early in August detailed production targets and norm s for consumption of materials for remaining portion of the current year and als o for the next financial year are prepared by the head of Divisions. Capital Exp enditure Shows all items of capital expenditure to be undertaken during the budg et period like expenditure on acquisition of new assets like machinery, furnitur e and office equipments which have reasonable life; expansion of existing facili ties and modification and improvements to plant and machinery resulting in i) in crease in capacity ii) Increase in useful life iii) Improvement in quality of ou tput and iv) reduction in cost of output is treated as capital expenditure. 24

Budget revision While preparing the next years revenue budget, the revenue budget for the current year is revised, based on the actuals from April to September a nd 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 giv e 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 activi ties and less of future forecasting & planning. 4.4.1. Cash and Bank Accounts Se ction The various functions include: 1. 2. 3. 4. 5. 6. 7. 8. 9. Receipt of cash, cheques, bank drafts, and postal money orders Payment of cash, cheques, bank dr afts, and letters of authority Handling of bank deposits/withdrawals, custody of cash and inter unit transfer of funds Maintenance of petty cash books and cash books Reconciliation of bank accounts Security arrangement of cash handling Safe custody of valuable documents Cash interests calculation Any other duties assig ned by authorized officer 4.4.2. Payroll Section Functions of the section are: 1. 2. 3. Preparation and di sbursement of salaries and wages to managerial and non-managerial employees Effe ct various recoveries through payroll and remit the same to concerned agencies P rocessing 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 tax es and duties to the Government. 5. SOME KEY INFORMATION Insurance schemes have undergone a drastic change in FACT due shortage in workin g 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 depar tments or plants prone to fire. Deciding on insurance scheme is not the prerogat ive of finance department alone. The engineering department has to approve the p lan and after the department wise approval, the corporate level approval has to be obtained. The various insurance schemes are: 1. 2. 3. 4. 5. 6. 7. 8. 9. Fire Insurance. Machine break down insurance. Electronic equipment insurance. Fidelit y insurance and cash in transaction/cash at safe/payroll insurance. Insurance fo r vehicles and heavy equipment. Open transit risk for all inland and all foreign purchases. Loss on profit insurance. Personal accident insurance. Storage insur ance. 5.1. Insurance schemes 10. Insurance for stock of finished goods, raw materials, industrial stores. 5.2 . Corporate plan Corporate plan is prepared by taking estimates and future proje ctions for 5 years. The corporate plan is revised every year by deleting one yea r in the 26

beginning and adding one year at the end, keeping the total budget period as 5 y ears. This plan projects the companys 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 constitu ted with chief of internal audit as chairman and members being the chief of fina nce, head of Cochin division, petrochemical division and head office. 5.4. Worki ng Capital management The Working capital is essential for any Organization to m eet its day to day requirements. Working capital may be specified as the firms cu rrent assets over current liabilities. As a large scale company, FACT also requi res 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 r aw material. If it has to avail more than the assigned quota the finance departm ent will have to take permission of Board of Directors. FACT approaches differen t banks to meet its working capital requirement and FACT maintains a consortium of banks for the same. They are: BANKERS SUPPORTING FACT: 1. 2. 3. 4. 5. 6. 7. S tate Bank of Travancore State Bank of Hyderabad State Bank of India Bank of Baro da Bank of India Canara Bank Dena Bank At present FACT has availed cash credit facility up to an amount of Rs. 188 cror es and letter of credit up to Rs. 100 crores and bank guarantee up to limit of R s. 15 crores. 27

5.5. Auditing Various types of audits in FACT are: Statutory audit, Government a udit, Cost audit, Income tax audit, Sales tax audit and Internal audit. Internal Audit Section Some of the main functions are 1. 2. 3. 4. 5. Operational/ system s/ management audit Proprietary audit and audit of sanctions Routine audit Surpr ise verification of physical stocks Special audits and studies 6. CHALLENGES OF FINANCE DEPARTMENT Due to which 6.1.1. Upgradation of plants & machinery is not possible 6.1.2. Hig h 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 comb ating shortage 6.1.4. Lack of flexibility in production 6.1. Working capital crunch 6.2. Low availability of credit due to nonpayment of loans & security to keep fo r loans. Due to which the organization: 6.2.1. Cannot grow and therefore stagnat es 6.2.2. Cannot compete with other fertilizer companies due to lack of fund 28

MATERIALS DEPARTMENT 1. OBJECTIVES 1. 2. To control and account for the materials in the organisation. To ensure th e 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. 2. 3. 4. 5. 6. 7. 8. Importing raw materials under the approval of safe purch ase committee constituted by the Board of Directors Maintaining adequate raw mat erials needed for production Procurement of Machineries, Intermediaries, equipme nt & spares Inspection of Materials Transportation of Raw materials, Products an d Byproducts Accountability for materials Purchase of stationary, and other Equi pment needed by individual department Vendor Development 29

This department is divided into 3 Sub Departments. They are: 1. 2. 3. Purchase S tores Traffic (Logistics) 3.1. PURCHASE DEPARTMENT The purchase procedure covers the following areas of procurement of goods and se rvices for the company. 1. 2. 3. 4. Capital items (For project and other purpose s). Equipment and spares. Raw material & Intermediary materials Package items in volving design, supply, erection and commissioning. Purchase Department is again divided into 3 sections. They are: 1. 2. 3. Raw mat erials Equipment spares and supplies FEDO & FEW Transport, Contracts and Stores 3.1.1. RAW MATERIALS SECTION Objectives 1. 2. 3. Purchase of materials for production, from India and abroad Make availa ble adequate amount of material at the right time Follow a fair & transparent pr ocedure in the above activities Functions 1. 2. 3. 4. 5. Importing raw materials under the approval of safe purchase commi ttee constituted by the Board of Directors Procurement of Materials needed for p roduction Determination of quantity of materials required Issue of Purchase orde r Pre & post dispatch Inspections 30

6. 7. Insurance Payment Raw materials are Sulphur, Rock phosphate, Furnace oil, Naphtha, Ammonia, Benzen e, Phosphoric Acid, Caustic soda and Sulpuric Acid. RAW MATERIAL PROCUREMENT PRO CESS Purchase Requisition Vendor Development Bid evaluation & Financial Concurrence E ntering into Contracts Purchase order Raw material requirement Raw material Transporting Raw Materials Department Raw material Storing Payment Inspections Production Plan Chart no: 3 CHALLENGES TO RAW MATERIAL PROCUREMENT 1. 2. 3. 4. Scarcity of Raw materials Sky rocketing prices Shipping Problems Working Capital crunch 3.1.2. EQUIPMENT & SPARES SECTION Objectives 1. 2. 3. Purchase of Equipment & spares from India or abroad Make available spar es at the right time Follow a fair & transparent procedure in the above activiti es 31

Equipment & Spares Include 1. 2. 3. Capital items like heavy machinery or plant (For project and other purp oses) Equipment and spares Package items involving design, supply, erection and commissioning Functions 1. 2. 3. 4. 5. 6. 7. 8. 9. Importing materials under the approval of safe purcha se committee constituted by the Board of Directors Determination of actual requi rement by checking with stores, technical department, management and giving spec ifications Vendor Development Bid evaluation & financial Concurrences Entering i nto Contracts Issue of Purchase order for equipment & spares Inspections of mate rials and stores Insurance Payment EQUIPMENT & SPARES PROCUREMENT PROCESS The User departments give their requireme nt which is validated by the Technical department and is finally approved by the management for issue of purchase requisition. The purchase requisition is check ed 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 ven dor. In case of specific goods such as tube light, bulb and fan vendor are alrea dy specified by the technical department and approved by the management. Wheneve r the user department needs them the store department moves forward to procure t hem. The process can be diagrammatically as follows: 32

User Department Requirement Raw material Procurement Payment Inspections Validating Requirement Despatch Purchase Requisition Material Procurement Purchase order Entering into Contracts Bid evaluation & Financial Concurrence YES Available at stores NO Vendor Development 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 & Monitori ng The materials department performs expediting of orders. In certain cases othe r agencies appointed for the purpose. Materials department continuously monitors vendors performance to ensure timely delivery and periodic status reports is m ade available to all concerned departments. Inspection may be carried out by FAC T or by third party inspection agencies, depending on the nature of items and fa cilities available. Department authorized for the inspection, receives the dispa tch document. The department responsible for the clearance maintains a register for dispatch documents and updates entries on a day-to-day basis. Payment of fre ight/certification of freight bills It is the responsibility of the department h ead entrusted with clearance of goods. All goods cleared from the carrier are fo rwarded to the receiving 33

section of the stores department or department authorized for this purpose. In c ase of bulk materials like stationeries, the consuming department directly recei ves raw materials/intermediates the goods. Materials received against turnkey jo bs awarded to agencies responsible for supply, transport, storage and erection a re not taken into stock by stores department. Rejection/Damage of Materials Reje cted consignment is kept separate and the stores/receiving department send a fir st information report to the supplier with the copy to finance and purchase depa rtment. In all cases of rejection / shortage/ damage other than for reasons attr ibutable to supplier, the stores department takes up the matter with the insurer s under advice to finance department. Follow up of the claims and settlement wit h insurer is done by finance department. VENDOR DEVELOPMENT Vendor Pre-qualification Pre qualified vendor list shall be maintained by materi als 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/del etion to vendors lists is made on a continuous basis on the above criteria. The re are three types of Purchase Requisition (PR) as follows: 1. 2. 3. For project s and major capital equipment For stores, including stationary and office suppli es, spares 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 fro m the date of enquiry is given for submission of bids in limited tenders. For op en tenders, 30 days from the date of appearance of advertisement is prescribed. Receipt and opening of bids Bids are opened by officers from finance, administra tion and purchase Department. Bidders representatives read the Bid which consist s of Prices, taxes and duties, payment terms, delivery period, performance guara ntee and brief description whichever is relevant. Bid evaluation and financial c oncurrence The technical part is forwarded to the indenting department by the pu rchase department as soon as the bid opening formalities have been completed. Th e steps involved in bid evaluation are: 1. 2. 3. Technical evaluation by indente r in consultation with other technical experts, where necessary Commercial evalu ation by the purchase department in consultation with other concerned department s Review and approval of technical and commercial evaluation by the competent au thority to determine the bids, which are technically and commercially suitable 4 . Comparison of prices and financial evaluation by purchase department in consul tation with other concerned departments Financial Concurrence For purchases abov e Rs. 25000, the purchase recommendation is forwarded to finance department. San ctioning authority is formed as per the delegation of powers. After financial co ncurrence, the proposal is forwarded to the sanctioning authority through purcha se order. 35

CHALLENGES OF EQUIPMENT & SPARE SECTION 1. 2. Approval of Bids on the basis of l owest quotation where sometimes quality is compromised Low working capital to ma intain sufficient stock of goods 3.1.3. FEDO & FEW, Transportation & Stores (FFTS) Section The Functions of the s ection are: 1. 2. 3. 4. Project related procurement for FEDO & FEW In-house proc urement for FEDO & FEW Storage of Raw materials Raw material transportation & Te chnical assistance for handling 3.2. STORES DEPARTMENT Objectives 1. 2. 3. 4. Collection and receiving of materials purchased Inventory Management & Control Issuing materials to user departments Disposal of surplus and obsolet e materials Functions 1. 2. 3. 4. 5. Receiving Holding Inventory Control Issuing Disposal PROCESS FLOW IN STORES DEPARTMENT Receiving Inspecting Holding Inventory Management Chart no: 5 36 Disposal Issue

Codification and classification All stocks items bears a 9 digit code prepared o n a significant numbering system. First digit is allocation for UD, CD and PD. S econd 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. Accordin g to the above classification, the shelves are allocated for each material. Proc edure followed When a material is received, the stores officer inspects the item s and is approved by the stores manger for holding in the stores after verificat ion. 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 a nd approved by the manager for dispatch. The issue is and recorded in the MIS. H owever, for disposal the list of items to be disposed is forwarded to the manage ment by the stores. Approved items are disposed or sold for scrap value and reco rded 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 i s sort wherever required. Obsolete items are disposed. MIS The stores maintain a ll its data in the computer and are updated every time movement of materials tak es 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 integrate d 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 Tea m (PSVT) are attached to finance department. A and B items are verified once in a ye ar 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 on ce in 2 years for Z items. Along with this officer, stock holding in-charge verifi es 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 l imits of: A Items > Rs 50,000, B Items < Rs 50,000 and > 5,000 and C Items < Rs 5,000. more control. F-S-N Analysis Here, analysis is based on the consumption rate. I tems moved within the last 5 years may be classified as Fast moving(F), and thos e 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 de cide 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 a s X, 15% value of total inventory as Y, 5% value of total inventory as Z. For sp ares V-E-D Analysis - Vital (V), Essential (E), and Desirable (D) Vital are thos e spares whose non-availability results in very high production down-time loss a nd/or entails very high cost due to emergency purchase. Essential spares are tho se whose non-availability is expected to cause moderate production down-time. De sirable spares are those whose 38 Computer centre prepares the list on basis of annual consumption. Accordingly, items A are given more attention and require

non-availability does not resulting in any significant production down time loss . The list is reviewed once in 2 years. CHALLENGES FOR STORES 1. 2. Maintenance due to shortage of labour Low stock of goods maintained due to shortage of Funds 3.3. TRAFFIC DEPARTMENT Objectives 1. 2. To ensure Loading and despatch of products To ensure right quantity and ri ght product to right vehicle and to the right destination Functions 1. 2. 3. Loading Arrangement Movement Traffic department is responsible for the dispatch of products to various market s. They maintain contacts with market department and production departments. The dispatch section of marketing division gives the demand of various depots in ea ch state to the traffic department. Based on this, schedules are formed and prod uct 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 depar tment selects the vendor for transport. Depots are allotted to vendors by the de partment. 39

Marketing division Depot Transportation 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 int o 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 eithe r 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 t he depot message is passed to the department. And the signed copy of MDA is retu rned 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 charge d from the vendor. FACT has permanent workers for loading activity. The departme nt 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 respon sibility of the department. The product is bagged in HTPG bags. The product is t ransported 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 fertilize r. Lorries and trucks for the transportation are chosen based on the tender. Maj or Transport Contracts A.S.R.TB.TCOSMOE.L.FL.R.LJ & PM.R.DP.K.AP & PS.K.L.S S.P. MU.RA.S.R transport Bharat Transport COSMO Carriers Expert Liner Enterprise Luck y Road line J & P Enterprise M.R.D Transport P.K Aboobacker & Co P & P Logistics Sree Krishna Lorry Service S.P Muthuraman Union Road ways Limited Optimisation Techniques 1. 2. Transportation by railway 14 wagons of train booke d at a time helps reduction of cost. Outsourcing of Logistics Certain issues lik e labour, vehicle repair can be overcome. This helps in preserving the core comp etence of the department. CHALLENGES OF TRAFFIC DEPARTMENT 1. 2. 3. Lack of flee t management system Labour issues Vendors Performance & Review 41

PRODUCTION PLANNING DEPARTMENT 1. OBJECTIVES 1. 2. 3. Production planning Co-ordination of production function 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 Sulphate Ammonium Phosphate Sulphuric Acid Phosphoric Acid Chart no: 7 3. FUNCTIONS OF PRODUCTION DEPARTMENT 1. 2. 3. 4. 5. Planning daily production according to annual target Submitting P lan to govt. and getting approval Monitoring actual production & checking any de viation Making revision plans according to actual production Maintenance of plan ts 42

4. PRODUCTION PROCESS Start here Production targets Plant Maintenance Approval of production plan* Checking Deviations from plan Raw Material Availability (RM Dept.) Monitoring production Chart no: 8 Annual production targets for the next year are prepared based on installed prod uction capacity of the plant and production data for the previous year. Necessar y feedback is also taken from marketing department while fixing the production t argets. 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 product ion budget is sent to the finance department for preparing finance budget. The p roduction plan and budget are then presented to the govt. for approval. The prod uction budget then acts as the basis for further performance monitoring. Based o n the production plan, purchase department initiates action for procuring raw ma terials. In the event of any change in the annual production plan becoming neces sary, the corresponding change in the raw material, requirements are intimated t o the purchase department. Production planning department receives data from all the plant and other interfacing departments and compiles them. Various MIS repo rts consist of 43

daily production reports, monthly reports and yearly reports they are sent to th e management. 5. FEATURES OF PRODUCTION PLAN 1. 2. 3. 4. 5. Production plan is based on the idea of producing the maximum wit h available raw material and production capacity of plant. Day- to-day productio n is planned according to raw material availability. Daily production plan is pr epared and likewise annual plan is also prepared. Day wise production plan is mo nitored. Production plan is always flexible. 6. PLANTS AT UDYOGAMANDAL DIVISION 1. 2. 3. 4. Ammonia plant Ammonium Sulphate plant Ammonium Phosphate plant/ FACT AMFOS 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 empl oys 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 t o 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 po wer gas Plant. 44

6.2.2. Phosphoric acid plant The Phosphoric acid plant is designed to produce 36 0 TPD of P205 through the dehydrate route. The plant designed by FEDO in collabo ration with Messer society de prayon of Belgium employs the prayon convertible p rocess to give a product having strength of 30% P205. A separate concentration s ection 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 desi gned to produce quantities of N P K fertilizers of various grades. FACTAMFOS Con sists of NPK and S in the ratio 20:20:0:13. 7. PRODUCTS 1. 2. 3. 4. Ammonium Phosphate/ FACTAMFOS Ammonium Sulphate FACT urea Muriate of potash Products NP 20:20 (FACTAMFOS) Ammonium Sulphate Sulphuric Acid Phosphoric Acid TPD (in MT) 450 667 1150 100 TPA (in MT) 1,60,000 2,10,000 3,38,570 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. Step s are being taken to enhance the procurement of sulphuric acid as well as phosph oric acid. Steps are also being taken to explore the possibility to import sulph uric acid. 9. ADHERENCE TO ISO IMPLEMENTATION Do what you write or write what you do 1. 2. FACT has a well defined procedure f or production. So according to ISO implementation it writes whatever it does. Pr oduction standards are also kept as per ISO standards. 10. CHALLENGES OF PRODUCTION DEPARTMENT 1. 2. Raw material scarcity is upsetting the entire production plant. Working ca pital 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 y ear have gone up 10 times and 5 times in case of naphtha. However, LNG can be su bstituted for naphtha which again is witnessing an acute shortage. Some raw mate rials like Rock phosphate and Sulphur are being imported, which again invites sh ipping 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 fr om 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 sellers market. However, its deman d is seasonal and is very much dependent on the Monsoon. Market penetration is v ery 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 farmers awareness about fertilizers. All of these call for a planned marketing effort and huge requirement of funds to meet the seasonal demand of f ertilizer. 2. OBJECTIVES 2.1. Monitoring of sales & distribution 2.2. Study & respond adequately to the i nformation from market research department and from field establishment 2.3. Lia ison with bulk buyers, central and state government officials and officials of f ertilizers 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. 2. 3. 4. 5. 6. 7. Sales Market Research Agronomy Preparation of sales report Processing and sending replies to audit queries at the divisional level Liaison with bulk buyers, central and state government officials and officials of fertil izers association of India 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. 2. 3. Sales Department D istribution Department Agronomy 4.1. SALES DEPARTMENT The sales department is headed by a Chief Manager who is responsible for sales c oordination of function across various depots, conduct an effective market resea rch for analyzing market and calculating the demand and finally promote the sale s of FACT products. FACT today holds major market share in Kerala, 11% in Karnat aka and 6% in other states. 4.1.1. Main products 1. 2. 3. 4. FACTAMFOS/Ammonium Phosphate Ammonium Sulphate FACT Urea 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 g rouped into two: 1. 2. Mass Communication Techniques 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, Exh ibition Wall Painting, Advertisement , Direct mail service etc. Personal Contact Methods As the name implies, in this method, more personal and closer contact w ith farmers are developed through promotional methods. The methods adopted by FA CT are through Demonstrations, Block demonstrations, Soil testing, Seminar, Stud y classes, Co-operative training programmes, Dealer training, Squad programmes e tc. Realizing the importance of bringing the essential agricultural inputs and f acilities for advisory service under single roof, FACT has converted its major s elling points into Agro Service Centres rendering service to farmers. These cent res 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 educatio n and sales promotion programs. These consist of fertilizer festivals, study cla sses, seminars, Krishi Vigyan Kendras (KVKS), crop campaigns, crop demonstration s etc., with an ideal blend of information and entertainment to drive home the m essage of balanced fertilizer use for increasing crop production. The creative a nd 49 , Radio jingles, Hoardings, Posters, Farmers awareness programmes in AIR,

novel education programs like village adoption of FACT have gained national reco gnition. 4.2. DISTRIBUTION DEPARTMENT Physical distribution of products is a maj or function of the marketing division. Chief Distribution Manager is entrusted w ith planning, monitoring and implementing of product distribution and co-coordin ating the movement from production units and ports. Marketing operations of FACT in respect of fertilizers follow a completely centralized pattern. The marketin g network of FACT is spread over the southern states of Kerala, TamilNadu, Pondi chery, Karnataka and Andhra Pradesh. In each state there are 4 area office and 1 6 regional offices. The distribution network consists of 100 Agro Service Centre s, 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 creat ed awareness about scientific cultivation and fertilizer use. The states offices are called area and their sub- divisions are called regions. Areas Kerala Tamil Nadu Karnataka Andhra Pradesh Alleppy Mangalore Hyderabad Pal akkad Bangalore Coimbatore Trichy Regions Kottayam Kannur Madurai Belgaum Vellore Hospet Vijayawada Kakinada Nellore Table No: 6 50

MARKETING OPERATIONS AGRO SERVICE CENTRES SWC / CWC POINTS SOIL TESTING LABORATO RIES AREA & REGIONAL OFFICES FIELD SALES OFFICES DEALER POINTS Table No: 7 4.2.1 . AGRONOMY DEPARTMENT Fertilizer sales are highly dependent on farmers awareness on modern techniques of farming by using fertilizer for high productivity. Aware ness creation involves an elaborate and well-planned farmer education and fertil izer promotion program, which in turn calls for a multiplicity of activities. Ch ief Agronomist has overall charge of the agronomy department, which renders tech nical guidance, and supervision of all agronomy services. 100 43 3 20 100 7759 5. PROCESS OF MARKETING DEPARTMENT Start here Market Research Sales Report Agronomy Selling Product Finding the depots Calculating Requirements Chart no: 10 Distribution 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 f ertilizers. The sales department monitors and reports competitors sales and col lects, scrutinizes, analyzes and compiles region wise and area wise sales of per formance and purchased products for providing information to management on achie vement against the target. The distribution department finds out the various dep ots as per the information given by sales and sells the products and subsequentl y 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 interp retation of data pertaining to fertilizer market. 6.1. Functions 1. 2. 3. 4. Preparation of product wise, month wise annual sales plan for each area. Publication of annual report of division Monitoring and repo rting of competitors sales as per performa prescribed Collection, scrutiny, ana lysis and compilation of region wise, area wise sales performance of own and pur chased products for providing information to management on achievement against t he target on a daily basis. 5. 6. 7. Submission of monthly performance report of the division to the CMD Ensuring product availability, dispatch monitoring and inventory control Submission of various statements to FAI for publication in the ir fertilizer statistics yearbook. 52

7. Performance of the Marketing Division during the financial year 2006-2007 as com pared 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 sal es 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 cor responds to a decrease of 11.93% during the year. Urea, Ammonia sulphate, MOP an d mixture sales shows an increase in sales compared to last year. About 3,407 to ns of Biofertilizers (Azospirillum, Rizobium, and phosphobactor) were sold durin g 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 organi zation after a long gap after actual sales, which leads to acute shortage of wor king capital. 8.2. Lack of fund for research activities 8.3. Narrow product rang e 8.4. Unnecessary intervention of state and central governments in distribution & sales 8.5. Recurring losses have put the organization on the back foot lookin g 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 Value ( Rs lakhs ) 15,126 14,128 17,360 24,047 12,649 10, 878 9,990 7,897 9,890 15,166 11,586 27,474 31,422 2,699 16,616 15,236 19,712 36, 578 40,216 Year 1988-1989 1989-1990 1990-1991 1991-1992 1992-1993 1993-1994 1994-1995 19951996 1996-1997 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 20032004 2004-2005 2005-2006 2006-2007 Quantity ( lakh tones ) 11.58 8.99 10.75 11.02 10.72 11.25 12.02 13.30 11.10 12. 61 12.09 13.16 14.80 12.26 10.45 7.78 7.84 9.83 9.47 Sales 27,614 20,902 26,705 33,628 44,011 48,204 63,4111 77,260 68,158 81,249 89, 690 98,800 111,872 96,841 71,643 46,051 53,117 69,671 67,196 Table no: 8 Total 42,740 35,030 44,065 57,675 56,660 59,082 73,401 85,157 78,048 96,415 101, 276 126,274 143,293 99,510 88,259 61,287 72,829 106,249 107,412 54

QUALITY CONTROL DEPARTMENT 1. OBJECTIVES OF QUALITY CONTROL 1.1. Customer satisfaction through excellence in quality of production and servi ces 1.2. Adherence to documented quality system 1.3. Promoting quality culture a mong 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. 2. 3. Quality checking Process control assurance Pollution control 4. QUALITY CONTROL PROCESS 4.1. Quality checking Raw material-Pre and post despatch check. It is usually do ne 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 test ed 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 mor e than required level of effluent, then the matter is reported to the plant mana ger, Quality department and GM (UC) 5. POLLUTION CONTROL MEASURES 5.1. Hydrocarbon-detectors are placed in vulnerable areas in the plant for trans mission to control room. 5.2. Computerized automatic ambient air monitoring syst em is placed at stations, inside the plant and two in the township to monitor am monia, carbon monoxide, non-methane hydrocarbon, sulphur dioxide and oxides of n itrogen on a continuous basis. The company continues to give top priority to pol lution control activities. It has already invested lot of money especially for s etting up pollution control plants at Udyogamandal, Cochin and petrochemical div isions. FACT Udyogamandal, Cochin Division are ISO 14000 certified units. As a c ommitment 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 limi ts as prescribed by the statutory authority. Treated liquid effluent and gas emi ssion from plants 56

conform to the Kerala State Pollution Control Board norms. The guidelines specif ied by Kerala State pollution control board are followed in the disposal of all hazardous wastes generated. The ambient air quality monitoring stations continuo usly monitor the level of pollutants like sulphur dioxide, Oxides of Nitrogen, A mmonia, Carbon Monoxide, Hydrocarbons and Suspended Particulate matters. 6. ACTIVITIES CARRIED OUT 1. 2. 3. 4. 5. 6. 7. 8. Reduction of air pollution from amophus plant and phosph oric acid plants Improving the quality of effluents on a continual basis Minimiz e dust problem in sulphur handling and prevention of sulphur spillage to river R eduction of contamination of raw effluents with vapour condensation from Hyam pl ant Reduction of noise level in SO2/Acid plant main air blower Reduction of SO2 emission during start up of sulphuric acid plant Minimize and recycle waste wate r from phosphate plant and sulphuric acid plant Improving housekeeping in phosph ate and sulphuric acid plant 7. CHALLENGES TO QUALITY CONTROL 7.1. Lack of expertise to handle raw materials quality checking 7.2. Aged machin ery Effluent discharge likely to exceed the permissible limit High noise polluti on 57

RESEARCH AND DEVELOPMENT 1. GENERAL INFORMATION FACT began research in a modest scale in 1962 with just four scientists. Over th e years this nucleus has grown in to a full-fledged but compact integrated divis ion with a team of about 12 personnel. The division is recognized by the ministr y of science and technology for in house research and by the ministry of environ ment and forests, Govt. of India. R&D plays a vital role in giving the company a nd its products the cutting edge in a competitive environment. FACTs well-equippe d R&D section has advanced facilities equipped with pilot plants, modern equipme nt and accessories. It is backed by a team of highly motivated research scientis ts. Various processes have been developed and patented by FACT R&D division of w hich several have been commercialized successfully. Field trials on slow release fertilizers developed by the division have been successful. Production of biofe rtilizers 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 mobi le laboratory equipped with state of the art instruments for monitoring, assessi ng, computing and recording air data. FACT has won Indian Chemical Manufacturers Association award twice for outstanding performance in Development of technolog y & Export of technology. 58

2. OBJECTIVES To carry out in-depth research, to provide specialized services to other divisio ns of the organization, and is involved in the production of environment friendl y 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 d ispatch and selling points. 4.2. Bio-fertilizer research and development FACT ha s set up a 150 TPA bio-fertilizer plant at R&D premises. The plant was commissio ned during the end of 1999, to take up the production of Nfixing Biofertilizers like Rhizobium, Azospirillum and P-solubilising biofertilizer 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 Biofert ilizers is based on specific demands of marketing Division. Efforts are underway to changeover to a new carrier material called Lignite that conforms to the rec ently laid down FCO regulation. 4.3. Quality maintenance of product at various d epots across the states Corporate Quality Survey FACT is committed to provide qu ality products to consumers. As a part of this strategy, FACT R&D Centre has bee n entrusted with checking the quality of fertilizer samples from production divi sions. The Quality check is usually period wise; sometimes surprise visits are a lso conducted. 4.4. Consultancy work especially for clients such as Govt. of Ind ia Nyrip Process FACT & IIT Chennai have signed an MOU for setting up of pilot plan t to produce fiber reinforced polymer matrix composites from caprolactum and car rying out scale up studies. Pilot plant studies at IIT Chennai are continuing. T his project has been funded by planning commission, Govt. of India under Technol ogy 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 fertilize rs in order to increase the efficient use of plant nutrients. The slow release f ertilizer project has been selected for partial funding under PATSER scheme by 60

DSIR, New Delhi, for, Agronomical evaluation by Tamil Nadu Agricultural Universi ty, Coimbatore and Kerala Agricultural University, Trichur. Presently a collabor ative 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. 3. 4. Recovery of sulphur from the waste sulphur muck of sulphuric acid plants Utilization of the by-products of the company for value a ddition Corporate quality survey of our products from Udyogamandal and Cochin Di vision 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 Udyogamandal am, Ernakulam, Wellington Island and Ambalamugal to ensure emission are within t he limit. 6. Rock phosphate Characterization R&D centre is having a bench scale Rock Phosphate testing facility, which is approved by MMTC. Management has const ituted 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 Biofertilizer a nd supplied to various Agro service centres and thereby meeting the entire requi rement of the Marketing Division. 2. Functioning of quality control cell enabled to maintain good quality of products and to reduce considerably the P205 loss d ue 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. 3. 4. 5. R & D centre plans to conduct studies on the incorporation of Zinc as M icronutrient in NP fertilizers Development and field testing of suitable Biofert ilizers for the acidic soil especially of Kerala Development of liquid fertilize r solution Development of a closed circuit pollution free process for the manufa cture 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 2004-2005 2005-2006 2006-2007 Capital 0.00 0.00 0.00 Revenue 31 .85 31.17 29.77 Total 31.85 31.17 29.77 As % of Turnover 0.026 0.022 0.020 Source: annual report 2007-08 Table No: 9 62

FIRE AND SAFETY DEPARTMENT 1. GENERAL INFORMATION As per the factorys ACT 1948, any organization with more than 1000 employees or f or Industries classified as Major hazardous unit (MHU) by the Govt. of India, re quires 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 t hat no operation is so important and no job is so urgent that one cannot find ti me to perform it safely. Further, it aims to see that an employee remain as heal thy as he entered the plant, by providing safe environment and safe working cond itions, 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 avoidabl e and only 2% accidents are unavoidable. The department aims at avoiding unsafe condition and reducing unavoidable accidents. 3. FUNCTIONS 1. 2. 3. Training Activity Checking compliance with the safety measures Acting i n 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 contra ct workers is trained to adhere to the safety measures. Office staff is also giv en necessary training to react in case of emergency and about the preliminary pr ecautions to be taken during their stay in the organization premises. Barge oper ators: 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 handl ing hazardous materials while transporting. Plant operators: Training is given t o 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 pre mises on shift basis. They continuously monitor the safety measures taken and ch ecks for deviation. The maximum permissible limit for each chemical in the envir onment, 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 info rm the matter to the concerned plant manager or department head. If the deviatio n is beyond the permissible limit, then production/process is stopped and resume s 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 sa fety 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 fi remen & 1 driver 6. SAFETY MEASURES 1. 2. Bringing up all levels of working to a correct safety attitude through tra ining and interaction Safe production by prompt attention on built-in- safety or integrated safety 65

3. 4. effective effluent treatment system in operation to render it harmless before le tting it out of the factory in addition to the safety department prevalence of s afety committee is set up to promote active participation at all levels which me ets 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. 7. 8. 9. A safety manual highlighting safety practices/ instruction is distributed among employees as guideline Routine plant inspection by safety fire staff and other staff in the line function notices unsafe condition to take cor rective measures Display of safety cartoon or caution boards at important locati ons Preparation of valuable information of safety and distribution among employe es 10. Organizing and conduct of mock drills based on onsite emergency plan to f urther 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 pr ecaution 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 introduc tion of first generation computers in finance to meet the growing need for the s peedy data processing. This multi system computer department is constantly updat ing its hardware and software. They started online computing in1986.The centre i s equipped with servers in all its divisions connected by FACT NET. A complete i mplementation and interlinking of various departments were completed in 2004. 2. OBJECTIVES 2.1. To keep the management abreast of he field of information technology and T resources in the enterprise. 2.2. To -commerce as soon as the technology is ss sector. the fast paced technological changes in t recommending timely enhancements of the I project FACT into the promising area of e adopted in a big way in the Indian busine

3. FUNCTIONS OF COMPUTER DEPARTMENT 1. 2. 3. 4. 5. 6. 7. Planning and procurement of computer systems in all divisio ns Software development and system support to all divisions User training on com puter awareness and applications Maintenance of FACTNET connecting all divisions Process data and prepare relevant information for various levels of management for appropriate and speedy decision making Prompt and efficient services for mee ting information requirements of the employer, payment of wages and settlement o f claims 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 K bps/ 2Mbps BSNL leased lines / fibre optic link and Ethernet LAN (Local Area Net work) 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 develop ed and implemented by M/s Tata Consultancy Services and CSC. The integrated syst em, which runs on Oracle-8i database platform optimizes business processes of th e enterprise and provides information for decision-making. Main modules of Onlin e Integrated Information System (OIIS) are finance, human resource, production, traffic/logistics, Maintenance, Materials, Marketing and sales. Major software s ystems in the organization are developed and maintained in-house by the skilled workforce at CSC. 6. ENVISAGED ACTIVITIES 1. 2. 3. Upgradation of WAN and LAN through OFC (optical fibre cable) by 2009 We b based connectivity for OIIS across various depots Real time information transf er 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 e ndeavor. It is considered to be the most expensive and important resource of eve ry 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 Organiza tion. 3.2. To motivate & manage human resource and train them to ensure their pe rsonal and organizational development. 4. ORGANISATIONAL CHART OF HR DEPARTMENT CMD (F.A.C.T) GM (HR) DGM (Admin) CM (Welfare) CM (IR) CM (Est.) CM (Legal) CM (Trg) CE (Ind. Eng.) Mgr (Public Relation) Chart no: 15 70

5. FUNCTIONS OF HR DEPARTMENT 1. 2. 3. 4. 5. 6. 7. 8. 9. Organizational human resource planning & development Retirement & selection Wage & Salary administration Employee records maintaining Performance appraisal Welfare programme Job evaluation Handling employee grieva nces Handling the legal issues within & outside the Organization 6. PROCESS OF HR DEPARTMENT The human resource department has 3 blocks which are: 1. 2. 3. Establishment Ind ustrial relation Welfare 6.1. Establishment Section The main functions are: 1. 2. 3. 4. 5. Recruitment & selection Transfer, rotatio n and placement of employees in consultation with divisional heads Wage and sala ry administration Performance Appraisal Retrenchment 6.2. Industrial Relation Industrial relation operates only within the Organization. The Interorganization al 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 import ance. 71

The main functions are: 1. 2. 3. 4. 5. 6. 7. Communication between management an d trade unions Grievance handling Settlement of dispute Handling disciplinary ac tion Safeguarding Employee rights Career related issues like promotion, transfer & rotation Resolving daily petty issues 6.3. Welfare Welfare schemes can be divided into Statutory, Agreement, Voluntary and Incentiv es The main objective of welfare measures is to maintain healthy working environ ment 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 1. Employees state insurance 2. Provident fund and miscellaneous provisions act, 1952-exempted scheme in FACT-FACT employees provident fund trust. 3. Payment of gratuity Act, 1972 4. Kerala labour welfare fund board rules, 1975 5. Industrial employment (standing orders) Act 1946 6. Factories Act, 1948-Covers (Health, sa fety, welfare) Agreement scheme 1. Family relief fund 2. Superannuation benefit fund 3. Family pension scheme of company 4. Retirement benefit fund 5. Employees welfare fund 6. Transport subsid y 7. Local travel expenditure 8. Subsidized bus service facility 9. Special vehi cle loan 10. Uniform & footwear 11. Leave travel concession 12. Evening snacks 1 3. Childrens education allowance 14. Interest subsidy 15. Free tea-twice a shift 16. Production incentives 17. Leave & holidays 72

Voluntary Scheme 1. Contributory health scheme 2. Group personnel accident insurance scheme 3. Ai d towards funeral expenses 4. EX-gratia payment for accident deaths 5. Gratuity payment-company scheme 6. Vehicle loan 7. Work clothes 8. Rain coats & Umbrellas 9. Free milk supply 10. Supply of coconut oil, soaps, and towel 11. Conveyance allowance for physically handicapped 12. Special Tiffin for fire and safety pers onnel 13. Laundering of special clothes 14. Sports & Recreation 15. Lalith kala Kendra 16. Fact employees consumer cooperative society 17. Fact employees housing cooperative society 18. School facilities 19. Company accommodation Incentives scheme 1. Incentives for employees acquiring higher qualification while service 2. Ince ntives to promote Hindi 3. Incentive to promote family planning 4. FACT merit aw ard 5. FACT service award 6. Attendance bonus 7. Suggestion scheme 8. Incentive for blood donation 9. Incentives to promote sports & players 10. Merit scholarsh ip scheme for employees children Table No: 10 7. INDUSTRIAL ENGINEERING The main objective of this section is to make effective utilization of the manpo wer resources and restructure it for the benefit of the organization. The main f unctions are: 1. 2. 3. Manpower planning that compose of Manpower audit & Foreca st future requirements Custodian of manpower inventory Work study a. Removing sy stem bottlenecks b. Production incentive etc. 4. 5. 6. Maintenance scheduling Wo rk environment study Employee problem analysis 73

8. ADMINISTRATION WING The wing is headed by DGM and maintains orderliness in internal affairs of the d epartment. The main functions are: 1. 2. 3. 4. Checking the performance of each department Consolidating the reports of different HR sections Act as a linking c hain between different sections Office and admin work of HR department 9. LEGAL SECTION The department looks after the Legal affairs of the organization. It is entruste d with the duty of handling cases within and outside the organization in which t he company is involved. 10. SOME KEY INFORMATION 10.1. RECRIUTMENT POLICY The Recruitment policy is done as per prescribed recrui tment specification with proper authority appointed by B.O.D. The following are the sources of recruitment. 1. 2. 3. 4. 5. 6. 7. 8. Confirmed employees within t he division or company Employment exchange as per provisions of Employment Excha nge Act Employees on deputation from Govt. of India Casual labours who were init ially taken after employment exchange Transfer from public sector undertakings A pprentices who completed training in FACT Dependents of deceased employees who d ied in service External source 10.2. PERFORMANCE APPRAISAL Performance Appraisal in FACT started in 1962. In 19 84, the system was further revised to include potential assessment, assessment o f training needs and performance counseling. 74

The main functions are: 1. 2. 3. 4. 5. 6. Self Appraisal for all management empl oyees Reporting and receiving officers specified for each level of appraisal Ass essment by the Assessment Committee Grading on the basis of assessment Communica tion of final rating to employees formally Provision for appeal by employees for mally 10.3. WORKERS PARTICIPATION IN MANAGEMENT FACT is one of the pioneer industrial undertakings, which initiated action to promote worker participation in manageme nt. Even as early as 1959, when FACT had only one division, the idea of having t he active association of employees in various aspects of productive operations i n 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 b est to the sustained growth and prosperity of the organization was in the mind o f 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 le ss than 4000 employees by the successful implementation of VRS. FACT has several divisions, which all together consist of 3817 employees now. The following tabl e shows the division wise employee strength of FACT during April - 2008 75

Division wise Staff Strength - April -2008 Non managerial Division Strength Avg. age HO UD CD PD FEDO FEW 116 994 828 466 2 8 23 47 46 50 45 48 50 49 47 Managerial Total Strength Avg.age Strength Avg.age 209 294 310 204 71 22 107 1217 49 49 52 47 49 50 48 49 325 1288 1138 670 99 45 252 3817 49 47 50 46 49 50 49 48 Marketing 145 Total 2600 Table No: 11 76

TRAINING DEPARTMENT 1. GENERAL INFORMATION The training and development activities of the company have been centralized wit h effect from April 2004. With this arrangement, the management development cent re (MDC), the training centres of Cochin division, Udyogamandal division and Pet rochemical division have been centralized into one department called FACT Traini ng Centre. Centralization was effected with a view to: 1.1. Utilize all resource s efficiently and to ensure more productivity 1.2. Identify the training needs o f all employees based on a uniform approach and imparting required training Trai ning Centre of FACT has started job-oriented courses in Fire & Safety Engineerin g. New courses in Heavy Equipment operation & maintenance, Welding technology an d Process Plant operation are being organized. These courses are planned to be o ffered in association with Governmental agencies and statutory bodies. The objec tive is to convert the training centre in to a Skill Development Academy with a vi ew to provide facilities for skills development and making educated youth employ able. 2. OBJECTIVES OF TRAINING 2.1. To identify training needs of the employees as a whole on the basis of unif orm criteria 2.2. To impart required training, which equip the employees consist ing of officers and workers of the company with knowledge and skill, required fo r improved performance 2.3. To meet training needs with specific reference to IS O 9001:2000 and ISO 14001:2004 standard requirements 2.4. To maintain a database of training details and development activities 77

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. 2. 3. 4. Training office rs and workers of the company as a whole in identified areas Meeting the obligat ion of Apprentice Act 1961/1973 Facilitating post qualification training, in pla nt training and project work to students Facility for employees to attend extern al training programmes 5. TRAINING PROCESS 5.1. Identification of training needs, trainees & programmes 5.1.1. Department-w ise identification of people to be trained 5.1.2. Suggestion of programmes by de partment head 5.1.3. Final selection of programmes by training department 5.1.4. Preparing detailed programme schedule by training department 78

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 diff erent 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 co nducted 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 i s decided on the basis of requirements. 5.3.1.On the job training This is specif ic to the job and concentrates on imparting knowledge and skill to the concerned employee. Induction training include introduction of an employee to the organiz ation and job by giving him all the possible information about organizations cult ure, climate, objectives, policies, practices, products etc. In job instruction training, necessary instructions about the job are given by the concerned superi ors. 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 wh ich an employee made to move from one job to another at certain intervals. Job r otation in FACT is intradepartmental, interdepartmental and interdivisional. Int ra-departmental job rotation is done within the departments so that all employee s are exposed to different functions carried out in their departments. Workers e mployed 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 leadersh ip quality, communication skills, attitude change etc. These methods consist of lectures, conference, group discussions, case studies, role playing and transact ional 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 N ational Productivity Council, Confederation of Indian Industries, National Safet y Council and Regional Labour Institute. Some of the technical programmes conduc ted are innovative approach in industrial pollution control, instrumentation and energy conservation of boiler operations and maintenance of bearings. Apart fro m the training conducted at training centre for the employees & students there a re external training conducted for the corporate cadre managers i.e. for chief M anagers 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 tra ined employee. The change in work behavior or general behavior forms the feedbac k. 6. CHALLENGES TO TRAINING 6.1. Improper feedback 6.2. Improper selection of employees from the various dep artments 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 st atutory requirement for all public sector companies. The Department in FACT is h eaded by a chief vigilance officer (CVO).The incumbent CVO is an IPS or IAS offi cer. 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 organi zation and to punish such activity when takes place, thereby, creating an enviro nment 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. 82

4. FUNCTIONS OF VIGILANCE DEPARTMENT 4.1. Acting on complaints 4.2. Inspecting high value files 4.3. Maintaining tran sparency and accountability of jobs 4.4. Department-wise monitoring of frauds an d malpractices 5. PROCESS FLOW CHART Start here Start here Dept-Wise monitoring for frauds and malpractices Receipts of complaints Inspecting high value files Suspicious Actions NO Fraud Detected YES Take action Acting on complaints Chart no: 19 Vigilance Notice boards have been installed in all the offices all over the comp any 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 corru ption 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 employe es The names of employees who are charge sheeted in the court in a corruption ca se 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 o f 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 a ctions are detected. 5.3. Inspecting High value files Some of the high value fil es are: 1. 2. 3. 4. 5. Files of high financial importance such as Budgeting and payroll Susceptible Files: E.g. Stores accounting. Files of importance. E.g. Raw material procurement, traffic of materials Adherence to policies: Transfer, pro motion, awards, incentives given to employees New projects & development related activities 5.4. Actions taken The cases of fraud charged against a department or an employe e is circulated throughout all departments which act as a deterrence to malpract ices 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 dep artment if paramount importance has been attached to the case. An employee is su spended from service during the period of trial and if found guilty from the cou rt 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 tha n Rs. 2 Crores worth assets. 2. OBJECTIVE To carry out the company affairs as directed by the Board of Directors and to ac t 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 Direc tors instructions 4.3. Public information officer complying with Right To Informa tion Act(RTI Act) 4.4. Compliance or adherence to the legal requirement of the o rganization 4.5. Supervision of share transfer/depository agents 85

Chapter 5 Functional Interdependence of Departments

FUNCTIONAL INTERDEPENDENCE OF DEPARTMENTS Fire & Safety H U M A N R E S O U R C E M A N A G E M E N T Computer Centre 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, wh ich is done by the finance department. The traffic section of the materials depa rtment helps the finance department in rising of fund by providing a link in pro duction and marketing its products. Finance department plays a major role in ven dor 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 th e goods for the marketing department. 3. Finance and Production Production targets are made on the basis of finance budge t 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 producti on 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-dep artmental flow of information and speedy data processing. Data access is control led within and between departments. Constant updating is done to catch up with t he modern developments. 8. Fire & Safety It operates all over the organization to ensure its safety ckly responds to emergency cases. All departments are interdependent and lated to each other for their functioning. One department cannot operate the absence of the other. The performance of the company depends on the partmental functioning rather than the department wise functioning. 88 and qui interre without interde

Chapter 6 Corporate Social Responsibility

CORPORATE SOCIAL RESPONSIBILITY Some of the measures taken by FACT as a part of its Corporate Social Responsibil ity are: 1. Dealer Network The dealer network plays a very crucial role in marke ting of fertilizer in the country. In most cases dealer, not only gives the fert ilizer but also imparts substantial knowledge and information on the use of fert ilizer and improved agricultural practices. 2. Community Awareness Community awa reness 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 go vernment of India for scheduled castes and scheduled tribes as well as for the o ther 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 di rectives of the government of India on reservation for other backward classes. 4 . Hospitals There are two full-fledged hospitals, one each at Udyogamandal compl ex and Ambalamedu respectively. These hospitals provide both inpatient and outpa tient treatment to the company employees who are members of the contributory hea lth 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. S chools provide free education to the children of company employees and on paymen t basis to children of neighboring public sector employees and for general publi c. 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 pr oductivity of agricultural land. It is clear that the rapidly growing population of the world will increasingly depend on commercial fertilizers for its food an d fiber. The worlds leading fertilizer producers are the Soviet Union and United States. Other leading producers are China, Canada, France and India. The worlds l eading producer of phosphate rocks is the United States. The Soviet Union and Mo rocco has the largest resources phosphate rock. The largest deposits of potassiu m 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 intermediarie s and products. Some European countries are following the elemental system, N an d K and it is likely that rest of the world will adopt this system. 2. NATIONAL SCENARIO India is one of the worlds largest producers and consumer of both phosphorous and nitrogenous fertilizers. The pesticide in the country is also among the fast gr owing 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 tonn es 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 r equirements. The Govt. of India has implemented 91

and commissioned major fertilizer projects in 1998-1999 and invested 4122.02 cro res. They will add 9.75 lacks of DAR (Di-ammonium phosphate and one lack tones o f 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. 2. 3. G overnment is contemplating complete decontrol in phased manner by 2006-07. Quant itative restrictions on fertilizer imports have been removed since April 1, 2001 . The implication of present policy environment for fertilizer sector in India 4 . 5. 6. 7. 8. is not promising. There are possibilities that domestic production and consumption of fertilizers may decline. The policy considerations which are likely to be implemented may result in making the domestic production of fertil izers unviable. At present there is no demand-supply gap in urea. A switch over in feed stock from naphtha to LNG for urea is envisaged depending on its availab ility and price. High energy cost does not permit further expansion in urea capa city within the country. Joint ventures abroad are likely to be developed. For p hosphate and potash also, joint ventures abroad are likely to be developed as th ere is no potential reserve within the country. 3. STATE SCENARIO Kerala has high degree of land use and cropping intensity. The states agricultura l productivity is decreasing year by year. The production and cultivation of ric e is decreasing and the farmers are concentrating on commercial crops like rubbe r and coconut. Due to the decrease in the cultivation of rice, the consumption o f nitrate and potash has come down. 92

Kerala has one of the lowest consumption of fertilizer in the country per hectar e of land area. FACT has the major market share in Kerala. To gain the market sh are 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, diAmmonium Phosphate and intermediaries) MFL- Madras Fertilizer Ltd. (products-NPK 17:17:17 and varia nts Vijay urea, Biofertilizers, Agro Chemicals). NFLNagarjuna Fertilizer Ltd. (P roducts-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 (Product s-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 premi um product in complex fertilizer containing Sulphur 1.3. Sustained operating par ameters 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/e nd segment 1.6. One of the two producers of Caprolactum in India with world-clas s quality 1.7. ISO Certification to most of the divisions 1.8. Strong dealer net work in South India 1.9. Good engineering and consultancy design, perhaps one am ong the best in Indian Fertilizer segment 1.10. FEDO has own process know-how fo r hydrogen, Sulphuric Acid, Ammonium Sulphate, DAP and complex fertilizers 1.11. FEDO has worked in association with many international process licensors, and h as acquired the capacity of customizing and designing projects to the requiremen ts of the Indian consumers. 1.12. FEDO is an approved center of surveyors and au dit for portliness, installation, non-destructive testing energy audits, ISO aud its 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 situati on 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. L ack 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 perm anent employees at high cost 3. OPPORTUNITIES 3.1. Less expensive alternative sources of energy and other inputs 3.2. Acquirin g technology to utilize other available resources 3.3. Expanding production capa city to drive benefits of scale 3.4. FACT ammonium sulphate has greater demand i n foreign countries 3.5. Opportunities for product diversification 3.6. Very lar ge asset base 4. THREATS 4.1. Unfavorable policy of the Government 4.2. Diminishing market for Caprolactu m 4.3. Infiltration of more fertilizer products to the southern markets from oth er 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. Se vere 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 becom e a dependable global player in agriculture and provide self reliance in enginee ring and technology especially in fertilizers. With this vision it navigated thr ough all difficulties which came on its way in the initial stages of growth. Set ting up of R & D centre was an envisaged activity to keep abreast with the lates t development, especially for Biofertilizers manufacture. With commercialization of its production at Udyogamandal, it began its expansion stage to Cochin divis ion 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 h ardly 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 l oss 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 sto pped 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 l ow funding to R & D department, reluctance in adopting new technologies, revisin g the corporate plans to the bare minimum targets and reduction in welfare measu res of the company. The trend has badly affected its market share and has steppe d 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 underst anding the companys situation and responding to its need. The future however look s bright when the opportunities and strengths of the organization are considered . FACTs real strength is its experienced employees who have tasted the different stages of its growth. Further, it tries to acquire new technology for cutting th e cost of production. Governments new policy on subsidy may rewrite the history o f FACT. About the study FACT is divided into 3 main divisions Udyogamandal division (UD) , Cochin division (CD) & Petrochemical division (PD). This study was conducted a t 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 impro ved my confidence by its successful completion to undertake such studies in the future. 97