Tata Chemicals grounds 2 unviable pilot projects

Salt and soda ash maker Tata Chemicals might see two of its pilot projects bite the dust as they have proved unviable.

The company had diversified into biofuels and farm produce distribution last year as a forward and backward integration of its core activities, respectively.

However, it has not been able to take the initiatives forward because of cost implications and now needs to write off the investments.

Among the projects was a 30,000 litre per day bio-ethanol plant at Nanded at an investment of Rs50 crore, which was to use sweet sorghum as feedstock and sweet sorghum bagasse as fuel for generating power. But ensuring smooth flow of feedstock was a problem.

“We have taken a write-off on the civil structure and may move it to where feedstock is not a constraint,” said R Mukundan, managing director, TCL.

Though the company has not decided what to do with the plant, it is looking at options such as leasing it out, selling or relocating it outside the country, said Mukundan.

Analysts feel this won’t be a major hit for the company.

“TCL has been quite a successful company in terms of diversification and has presence in four continents the world over,” a director of a leading rating agency pointed out.

The other failed project is the diversification into farm produce distribution — the company wanted to use its robust retail network to source farm produce directly from the farmers and sell them in the market under the brand ‘Khet Se’. In fact, in February 2007, it had set up a joint venture with Europe’s leading fresh produce company, Total Produce, to set up a state-of-the-art distribution network for fresh fruits and vegetables.

However, at a recent press conference, P K Ghose, chief financial officer, said the company has made a “provision for impairment of investment in Khet-Se of Rs12 crore, post suspension of operations.”

Sageraj Bariya, managing partner of Equitorials, an independent research firm, said the company decided to stop making further investments in the project as the idea did not find favour in the market. “However, that doesn’t put a question mark on the company or its execution skills.”