About FACT (The Fertilisers and Chemicals Travancore Limited)

FACT, a Government of India enterprise has business interest in manufacturing and marketing
of fertilizers, caprolactum, engineering consultancy and fabrication of equipments.

Units of FACT include two manufacturing divisions-Udhyogamandal complex (UC) and Cochin
Division (CD, the consultancy unit FACT Engineering & Design Organization (FEDO), the
fabrication division FACT Engineering Works (FEW) and the Marketing Division.

The company has also interest in petrochemical, hydrometallurgy, chemicals and

pharmaceuticals.

Mission and Vision of FACT

Mission of FACT

To function as a dependable and globally competitive producer of fertilizer and other allied
products and to develop self reliance in the field of engineering and technology, especially in
the field of fertilizers, chemicals, petrochemical, oil & gas industry.

Vision of FACT

To emerge as leading company in the business of providing quality agriculture and industrial
inputs and providing engineering services for industrial and infrastructural facilities.
Objective of the Study
The objective of the study was:

1. To understand the organizational framework and it’s functioning

2. To gain knowledge about the different departments of the organization and the functions

3. To study the interdependence of different departments

4. To make a SWOT analysis of the organization

Functions of Various Departments

Material Department
1. Importing raw materials under the approval of safe purchase
2. Maintaining adequate raw materials needed for production
3. Procurement of machineries, intermediaries, equipment & spares
4. Inspection of materials
5. Transportation of raw materials, products and byproducts
6. Accountability for materials
7. Purchase of stationeries, and other equipment needed by individual department
8. Vendor development

The Material Department is divided into 3 sub departments:

i. Purchase
ii. Stores
iii. Traffic (Logistics)
Purchase Department
The purchase procedure covers the following areas of procurement of goods and services for
the company:
1. Capital items (for project and other purposes)
2. Equipment and spares
3. Raw material & intermediary materials
4. Package items involving design, supply, erection, and commissioning

Purchase department is again divided into 3 sections:

i. Raw Material
ii. Equipment spares and supplies
iii. FEDO & FEW transport contracts and stores.

Raw Materials Section

Objectives
1. Purchase of materials for production, from India and abroad
2. Make available adequate amount of material at the right time
3. Follow a fair & transparent procedure in the above activities

Functions
1. Importing raw materials under the approval of safe purchase committee constitute by
the Board of Directors
2. Procurement of materials needed for production
3. Determination of quantity of materials required
4. Issue of purchase order
5. Pre & Post dispatch inspection
6. Insurance
7. Payment

Raw materials are sulphur, rock phosphate, furnace oil, naphtha, ammonia, benzene,
phosphoric acid, caustic soda and sulphuric acid.
Challenges to raw material procurement
1. Scarcity of raw material
2. Sky rocketing prices
3. Shipping problem
4. Working capital crunch

Equipment & Spares Section

Objectives
1. Purchase of equipment & spares from India or Abroad
2. Make available spares at the right time
3. Follow a fair and transparent procedure in the above activities

Equipment and Spares include:

1. Capital items like heavy machinery or plant (for project and other purposes)
2. Equipment and spares
3. Package items involving design, supply, erection and commissioning

Functions
1. Importing materials under the approval of safe purchase committee
2. Determination of actual requirement by checking with stores, technical department,
management and providing specifications
3. Vendor Development
4. Bid evaluation & financial concurrences
5. Entering into contracts
6. Issue of purchase order for equipment & shapes
7. Inspections of materials and stores
8. Insurance
9. Payment

Equipment & Spares Procurement Process:-

The User departments give their requirement which is validated by the technical department and is
finally approved by the management for issue of purchase requisition. The purchase requisition is
checked with the store stock. If the store already has the item then it is supplied to the concerned
department; otherwise items are procured with help of a vendor. In case of specific goods such as tube
light, bulb and fan vendor are already specified by the technical department and approved by the
management. Whenever the user department needs them the store department moves forward to
procure them. The process can be diagrammatically as follows:

Purchase order

Detailed purchase order is issued soon after the letter of intent and normally within 30 days of issue of
letter of intent.

Inspection & Monitoring

The materials department performs expending of orders. In certain cases other agencies appointed for
the purpose. Materials department continuously monitors vendor’s performance to ensure timely and
periodic status reports is made available to all concerned departments.

Inspection may be carried out by FACT or by third party inspection agencies, depending on the nature of
items and facilities available. Department authorized for inspection, receive the dispatch document. The
department responsible for the clearance maintains a register for dispatch documents and entries on a
day-to-day basis.

Payment of freight/certification of freight bills

It is the responsibility of the department head entrusted with clearance of goods. All goods cleared from
carrier are forwarded to the receiving section of the stores department or department authorized for
this purpose. In case of bulk materials like stationeries, the consuming department directly receives raw
materials/intermediates the goods. Materials received against turnkey jobs awarded to agencies
responsible for supply, transport, storage and erection are not taken into stock by stores department.

Rejection/Damage of Materials

Rejected consignment is kept separate and stores/receiving department send a first information report
to the supplier with the copy to finance and purchase department. In all cases of
rejection/shortage/damage other than for reasons attributable to supplier, the store department takes
up the matter with the insurances under advice to finance department. Follow up of claims and
settlement with insurer is done by finance department.
Vendor Development
Vendor pre-qualification

Prequalification vendor list shall be maintained by materials department. The vendor list comprise of all
pre-qualified vendors under each category stating clearly the respective capability in terms of volume of
work, specification, level of technology, etc with rating of the vendors. Addition/deletion to vendor’s
lists is made on a continuous basis on the above criteria.

There are three types of purchase Requisition (PR) as follows:

1. For projects and major capital equipment

2. For stores, including stationary and supplies, spares
3. For services

Inviting Bid

Bids are invited by giving Advertisements in news paper, magazines, media, website etc. The purchase
Manager invites the bid. Normally, 30 days from the date of enquiry is given for submission of bids in
limited tenders. For open tenders, 30 days from the date of appearance of advertisement is prescribed.

Receipt and opening of bids

Bids are opened by officers from finance, administration and purchase Department. Bidders
representative read the Bid which consists of prices, taxes and duties, payment terms, delivery period,
performance guarantee and brief description whichever is relevant.

Bid evaluation and financial concurrence

The technical part is forwarded to the indenting department by purchase department as soon as the bid
opening formalities have been completed. The steps involved in bid evaluation are:

1. Technical evaluation by indenter in consultation with other technical experts, where necessary
2. Commercial evaluation by purchase department in consultation with other concerned
departments
3. Review and approval of technical and commercial evaluation by the competent authority to
determine the bids, which are technically and commercially suitable
4. Comparison of prices and financial evaluation by purchase department in consultation with
other concerned departments.
Financial concurrence

For purchases above Rs. 25000, the purchase recommendation is forwarded to finance department.
Sanctioning authority is formed as per the delegation of powers. After financial concurrence, the
proposal is forwarded to the sanctioning authority through purchase order.

Challenges of Equipment & Spare Section

1. Approval of Bids on the basis of lowest quotation where sometimes quality is compromised
2. Low working capital to maintain sufficient stock of good

FEDO & FEW, Transportation & Stores (FFTS) Section

The functions of the section are:

1. Project related procurement for FEDO & FEW

2. In-house procurement for FEDO & FEW
3. Storage of Raw materials
4. Raw material transportation & Technical assistance for handling

Functions of Marketing Department

1. Sales
2. Market Research
3. Agronomy
4. Preparation of sales report
5. Processing and sending replies to audit queries at the divisional level
6. Liaison with bulk buyer, central and stage government officials and officials of fertilizers
association of India
7. Sales force motivation through internal and external training programme

The marketing department consists of various sub department organized on the basis of their
function. They are:

1. Sales Department
2. Distribution Department
3. Agronomy
Sales Department

The sales department is headed by a chief manager who is responsible for sales coordination of function
across various depots, conduct an effective market Research for analyzing marketing and calculating the
demand and finally promote the sales of FACT Product. FACT today holds major market share in Kerala,
11% in Karnataka and 6% in other states.

Main products

1. FACTAMFO S/Ammonium Phosphate

2. Ammonium Sulphate
3. FACT Urea
4. Muriate of potash

Sales promotion tools of FACT

FACT over the years have innovated various techniques of sales promotion. Many of them are
recognized as effective tools of promotion by national and international agencies. These techniques are
mainly grouped into two:

1. Mass Communication Techniques

2. Personal Contact Method

Mass Communication Techniques

This method involves catering to a large number of people in the shortest time possible. Advertisement
are done through films, Exhibition Radio jingles, Hoardings, Posters, Farmers awareness programmes in
Air, Wall painting, Advertisement, Direct mail service etc.

Personal contact Methods

As the name implies, in this method, more personal and closer contact with farmers are developed
through promotional methods. The methods adopted by FACT are through Demonstrations, soil testing,
Seminar, Study classes, Co-operative training programmes, Dealer training, Squad programmes etc
Realizing the importance of bringing the essential agricultural inputs and facilities for advisory service
under single roof, FACT has converted its major selling points into Agro Service Centers rendering service
to farmers. These centers advise the farmers on modern farm management techniques, credit
availability, marketing prospects etc. It also prepares detailed farm plans for each farmer according to
His agriculture pattern. FACT is the pioneer in fertilizer education and sales promotion programs. These
consist of fertilizer festivals, study classes, seminars, Krishi, Vigyan Kendras (KVKS), crop campaigns, crop
demonstrations etc, with an ideal blend of information and entertainment to drive home the message of
balanced fertilizer use for increasing crop production. The creative and education programs like village
adoption of FACT have national recognition.

Distribution Department
Physical distribution of products is a major function of the marketing division. Chief Distribution
Manager is entrusted with planning, monitoring and implementing of product distribution and
coordinating the movement from production units and ports. Marketing operations of FCT in respect of
fertilizers follow a completely centralized pattern. The marketing network of FACT is spread over the
southern states of Kerala, Tamil Nadu, Pondicherry, Karnataka and AndraPradesh. In each state there
are 4 area office and 16 regional offices. The distribution network consists of 100 Agro Service Centers,
50 field storage points and over 7900 retail selling point in these states, and serves the farmers by
supply of fertilizers and agronomy advice. Through innovative farmer education and promotion
programme, FACT has created awareness about scientific cultivation and fertilizers use.

Agronomy Department
Fertilizer sales are highly dependent on farmer’s awareness on modern technique of farmering by using
fertilizer for high productivity. Awareness creation innovation an elaborate and well-planned farmer
education and fertilizer promotion program, which in turn calls for a multiplicity of activities. Chief
Agronomist has overall charge of the agronomy department, which renders technical guidance, and
supervision of all agronomy services.
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 the organization after a long gap after actual sales, which leads to acute shortage of
working capital.

8.2 Lack of fund for research activities

8.3 Narrow product range

8.4 Unnecessary intervention of state and central government in distribution and sales

8.5 Recurring losses have put the organization on the back foot looking for survival in the present then
long term plan & resulting research, leading to low level of research activities and narrow product range.

SWOT Analysis of FACT

Strength:

1. High capacity utilization

2. High quality products. FACTAMFOS is a premium product in complex fertilizer containing
sulphur.
3. Sustained operating parameters of the plant at good level and productivity of the plant at
good level.
4. Well-qualified and technically skilled manpower.
5. Good support with farmers /end segment.
6. One of the two producers of Caprolactum in India with world-class quality.
7. ISO Certificate to most of the divisions.
8. Strong dealer network in South India.
9. Good engineering and consultancy design, perhaps one among the best in Indian fertilizer
segment.
10. FEDO has own process know- how for hydrogen, sulphuric acid, ammonium sulphate, DAP
and complex fertilizers.
11. FEDO has worked in association with many international process licensors, and has acquired
the capacity of customizing and designing projects to the requirement of the Indian
consumers.
12. FEDO is an approved center of surveyors and audit for portliness, installation, non-
destructive testing energy audit, SO audits and so on.
 Weakness:
1.1. The government controls the prices of finished goods, but the prices of raw materials
are controlled. So it is forced to operate in an uneconomic situation.
1.2. The average age of employee is very high (49yrs). The number of younger professionals
is decreasing and some managerial personnel are forced to handle more than one
position due to freeze on recruitment.
1.3. Lack of product line diversification.
1.4. Lack of working capital resources.
1.5. Several unskilled jobs, which could be sub contract are undertaken by the permanent
employees at high cost.

Opportunities:

 Less expensive alternative sources of energy and other inputs.

 Acquiring technology to utilize other available resources.
 Expanding production capacity to drive benefits of scales.
 FACT ammonium sulphate has greater demand in foreign countries.
 Opportunities for product diversification.
 Very large asset base.

Threats:

1. Unfavorable policy of the government.

2. Diminishing market for Caprolactum.
3. Infiltration of more fertilizers products to the southern market from other producers.
4. Inherent bottlenecks in infrastructure facilities.
5. Lack of products differentiation.
6. High pricing and scarcity of raw materials.
7. Severe liquidity crunch leading to non-operation of plants at higher capacity.
Market Research
Market research Department is essential for the success of marketing function. The main
function of marketing research is the collection, analysis and interpretation of data pertaining
to fertilizer market.

Function:

1. Preparation of product wise, month wise annual sales plan for each area.
2. Publication of annual report of division.
3. Monitoring and reporting of competitor’s sales as per performa prescribed.
4. Collection, scrutiny, analysis and compilation of region wise , area wise sales
performance of own and purchased products for providing information to management
on achievement against the target on a daily basis.
5. Submission of monthly performance report of the division to the CMD.
6. Ensuring product availability, dispatch monitoring and inventory control.

Submission of various statements to FAI for publication in their fertilizer statistics yearbook.

Conclusion:
The study was conducted with a view to understand the function of FACT and its department. It
was done mainly through secondary research. It helped us gain an insight into the operation of
various departments in FACT and also to gain knowledge as to how they operate. This study has
improved our confidence by the successful completion to undertake such studies in the future.