In recent years, the progress made by Gujarat Narmada Valley Fertilisers & Chemicals (GNFC) has been remarkable. At the helm of this transformation is Rajiv Kumar Gupta, MD of GNFC who holds this post concurrently with that of Principal Secretary, Labour, Government of Gujarat. In fact, one of his objectives is to fulfil the vision of Prime Minister Narendra Modi in making the neem tree a key part of this process of transformation. It began as a project for coating (nitrogenous) fertiliser with neem oil to prevent its diversion to non-agricultural uses. It then became a project for social transformation and for prodding GNFC into becoming an FMCG company as well. RN Bhaskar writes about GNFC, with editorial support from Jescilia Karayamparambil. Given below are edited excerpts.
The last nine months have been remarkable. How did you achieve it?
Well, this achievement is not only an achievement of nine months. We have been consistently working on it. For the last 3-4 years the company has been making very substantial and very-focused efforts to increase the operational efficiency of all our plants and to make them more profitable.
Especially, the TDI plant which about four years back was in a bad shape with time and cost overruns of almost Rs 800 crore. We had a debt of almost Rs 3,000 crore and daily debt interest liability of almost Rs 1.5 crore.
We started working on that plant and made lots of improvement. When we started the plant, the market was not good and there was stiff competition. There was a global drop in prices by the major producers of TDI. We fought it out. We consistently increased production – at one time by 120% over the previous year.
We also worked on various statutory frameworks and we got ultimately the anti-dumping duty imposed by the Government of India. The government was kind enough to accept our plea on TDI and that helped us. But more than that, we also worked on decreasing our costs and with gradual improvement in plant operational efficiency and betterment of market. We have reduced our debt liabilities from a level of almost Rs 2,381 crore.
Over the last three years we have reduced our long-term debt level to almost Rs 213 crore by the end of this quarter. We are positive that we will completely wipe that out and make the company debt-free by the end of this financial year.
We also adopted a policy of export-led growth. On the one hand, we were battling with the local imports that were coming from various countries; on other we were also under the obligation to fulfill the EPCG. We started from a level of just exports of Rs 6 crore to six countries to exports of almost over Rs 400 crore by the end of this quarter, and hopefully to more than Rs 600 crore by the end of this financial year to 66 countries. This has been a story of a combination of these factors, plant operational efficiency, reduction in debt and a very conscious strategy of export-led growth.
How would you allocate total profits? Which is the most profitable business of yours?
See, this is internal sensitive information. But I would like to tell you that about 65 per cent of my revenues come from the chemical segment and the rest comes from the fertilizer segment. TDI has been one of our major chemicals, but consistently I have been maintaining that this company should not be evaluated simply on the basis of TDI. For instance, in another basket, we have other chemicals: methanol, ethyl acetate and formic acid. We have earned, or have had sales realisation in nine months, which have overtaken the sales realisation of last 12 months in the last financial year.
In four key chemicals— TDI, methanol, ethyl acetate and formic acid, we have crossed the sales realisation of last year in just nine months’ time. TDI capacity utilisation has increased. TDI volumes have increased. Export footprint has increased. Not only that, the domestic market has also been expanded from almost 49 per cent to 63 per cent at the end of this quarter. We hope to cover even 75 per cent of domestic market by the end of this financial year.
When you talk about exporting Rs 600 crore to 66 countries, what are you exporting?
We are exporting not only TDI but other chemicals also. We are exporting methyl formate. We are exporting ethyl acetate. So we have a diverse basket. The weightage goes in favour of TDI. But then there is a diverse basket of export which we are adopting. In fact, we are now planning to export even aniline to the African region. Aniline had never been exported. So we have had some marketing tie-ups with some of the major companies across the world.
More importantly, TDI now has being exported to all over the globe. We are exporting TDI to all continents. In fact, we have exported TDI even to countries which are major producers of TDI like China and Korea. So that is our achievement.
Are you eyeing Saudi Arabia for TDI?
The Sadara plant of Saudi Arabia is definitely coming up. But then, we should also not forget the fact that many of the plants, world-over, are not doing well and they are not running at full capacity. So the coming of Sadara into production will not make a very major dent, or will not make a dent at all on the pricing of TDI. It will serve the demand world over more efficiently. But the prices of TDI are not going to come down, at least in the short-term and medium-term with Sadara coming into operation. We should not forget that TDI plants world over have taken years to stabilise. So the operation of one more plant is not going to flood the market.
What is this ecosystem that you have developed where rural communities have been able to generate cash and employment?
The whole thing started with the visionary and historical decision taken by the Prime Minister of India of 100 per cent coating of Neem on urea. Now India consumes 31 million tonnes of urea, of which 24 million tonnes of urea is produced by 26 urea companies in the country and the rest is imported. Now Prime Minister has mandated that all urea, each and every gram of urea in this country, is going to be coated with Neem oil. Now when we are talking of 31 million tonnes of urea the requirement of – coating of this urea is about 27,000 tonnes of Neem oil. For producing 27,000 tonnes of Neem oil, we require about 4, 00,000 tonnes of Neem seeds.
The collection centres have worked so efficiently, that in last three years we have collected almost 45,000 tonnes of Neem seeds and produced more than 3,000 tonnes of Neem oil. It has benefited to the extent of almost 4.5 lakh women and 2 lakh other people who have been involved in this operation.
So the whole project has developed, has got institutionalised and has spread across the whole country. Now we are expanding and have expanded to four states already.
What are the other plans you have with neem?
Now it is a win-win situation both for the company and for the people who are getting benefited. We are developing a Neem vertical and we have aimed at a turnover of almost Rs 50 crore this year. We are hopeful about achieving that and a turnover of almost Rs 500 crore in three years time. We are increasing our production capacity. We are increasing our marketing network. Just three months earlier, Neem products were being sold at about 3,000 retail outlets including big chains like Big Bazaar, Star Bazaar, Defence Canteens, CPC, Central Police Canteens, Kendriya Bhandar. Now the Neem products are being sold at 21,000 retail stores across the country. Now we are aiming at improving and increasing this retail network.
We hope to create a basket of around 20 products in the next six months, increase the marketing network to almost 25,000 to 30,000 shops, and increase our production capacity.
What progress is made to create protocols in ensuring that there are respectable standards for neem oil?
Well, it has proceeded quite substantially and we are working with various agencies and Ministry of the Government of India. Ministry of Fertilizer has been supporting us. Various studies, laboratory studies and field studies have been carried out by Central Government organisations including Gujarat Forensic Science University to create standard products. Central Government, especially the Ministry of Agriculture has been doing a very fantastic work in this.
Can you talk about the expansion programs?
The Board has advised me now it is high time for expanding our capacities, going in for expansions, going in for both Brownfield and Greenfield projects. So we have constituted internal expert groups, senior expert groups and they are working on it. The primary area we identified for expansion is in acetic acid capacity, because India has been consuming almost 8, 00,000 tonnes of acetic acid.
We are also planning to expand our IT operations. We have an IT Wing and the turnover of IT Wing has increased substantially. We had almost Rs 190 crore of turnover last year, which was a substantial increase in turnover. This year again, we are bidding for various Smart City projects.