Ladies and gentlemen,
I welcome you all to the 33rd Annual General Meeting of your Company with great pleasure. I am sure you must have gone through the Annual Report for the year 2002-03 that has been with you for some time now. You would have also reviewed your Company’s performance for the year.

Before we start to discuss your Company’s performance, please give me a few minutes to present you with your Company’s views on the environment we function in.


CHEMICAL FERTILIZERS--THE NEW FOCUS
Chemical fertilizers, a man-made farm input, enhanced the speed of replenishing nutrients to soil that, in India, had been used for agriculture for millennia.

Inorganic nutrients, along with hybrid seeds, pesticides and customized irrigation proved to be the pillars on which we successfully staged the Green Revolution. As a result, we were able to feed adequately an exponentially growing population and ensure food security for ourselves.

Among these, fertilizers have been the most important contributory to agricultural growth in India. They continue to be the critical farm-input, but also, sadly, the one sector always taken for granted.

Seventy percent of India’s population participates in agriculture, being responsible for 30 percent of the GDP. Despite significant increases in agricultural growth rates not making a direct and proportional impact on the GDP, it is a well-known fact that the growth of the agriculture sector has an indirect but incremental effect on all the other sectors of our economy. The Tenth Five Year Plan (2002-2007) envisages a 4 percent growth for agriculture. Though the impact on GDP would be less than a percentage point, the gains for other sectors would be immense.

The agri-sector, therefore, not only ensures food security for the nation but also assures livelihood security for millions. The challenge today facing policy makers is to delink the substantial dependency of our population from agriculture as an economic activity without affecting livelihood. One way this can be done is by increasing automation and using the surplus human resource to create agri-support services like marketing, logistics and processing. Already the Central Government is working out guidelines on the incentives to be extended to corporates and big companies to invest in the farm infrastructure by facilitating and promoting the association of corporates with proven credentials in the implementation of the Agri-Export Zones. The aim is to give a boost to productivity and quality of specified agricultural products leading to accelerated exports.

Another way to ensure that food production is not affected is to increase the use of fertilizers to at least double the per acre consumption now. This is the only way if the world must produce three times as much food for the more populous world of tomorrow, but from the land already put under the plough. In fact, the land area available for farming is declining the world over.

Only then can the 10th Five Year Plan target of 8 percent plus growth rate be achieved. Only then can our growing population be fed; only then can we direct our resources to other equally important items on the nation’s economic agenda, signalling the dawning of a golden era for not only Indian agriculture but for other sectors as well.

The importance of the other pillar--water--responsible for the success of our Green Revolution is driven home sharply in times when it is in short supply. And we have just gone through one of the driest years in living memory. With the rainfall nearly a fifth lower than normal, about 30 percent of the country was affected by drought. A tenth of the country’s area was categorized as experiencing severe drought. From drinking to irrigation and animal husbandry, the applications of water, ironically, became the burning issue everywhere.

It is matter of pride for India that the worst drought in decades was thwarted from claiming human lives. India produced more food grain in 2002 than it did during the last drought in 1987, indicating a greater acceptance and application of modern farming techniques by the average Indian farmer. He deserves our congratulations and any future support.

But water retains the propensity to throw grave challenges in the future. Experts worldwide are agreed upon one thing: water will be source of most, if not all, interstate and international conflicts and engagements in the years ahead. The good news is that there is some serious and well-directed thinking already taking place at various levels to come up with solutions to avoid these probable conflicts.

From rain harvesting to a river-grid, the ideas are many. For any one or a combination of these ideas to be successful in reaching its objectives, water must be nationalized, aqua-resources and applications should be mapped and all policies and plans have to be equitable and transparent like water from a mountain stream. On the parallel, a mechanism to update the National Soil Survey and periodically recompute land-use planning data needs to be commissioned. The information thus compiled should be made available freely and disseminated widely so that the entire exercise becomes purposeful.

Just as our food buffers stood us in good stead in one of the worst droughts of the past 100 years, the success of our water management will serve us when there is inadequate rainfall in any given year.

Clearly, this is one natural resource we have to learn to use and conserve judiciously. We should be more open to creative ideas for better water management irrespective of where it comes from. Already, some State Governments like Tamilnadu, Gujarat and Rajasthan have taken proactive and cost-effective steps in the direction of aqua-conservancy through micro-management of water resources. For the welfare of our children and their children, we must do everything possible to bring success to these public initiatives.


FERTILIZER INDUSTRY
A new scheme for urea pricing has come into effect from 1 April 2003 and is being implemented in stages. The three stages, from 1 April 2003 to 1 April 2006 and beyond, are based on vintage and feedstock and will arrive at the retention price on a group-based formula. The Government expects that this new pricing policy will reduce its subsidy burden, encourage competitive production practices and promote greater transparency, uniformity and efficiency.

The era of liberalization is truly upon the Indian fertilizer industry. In the inevitable competitive environment, cost of production has to be reduced and quality products delivered. The choice of raw materials has to be such that the desired quality is achieved without affecting cost considerations. Further there is a need to produce a variety of Nitrogen, Phosphate and Potash formulations to meet the variety in demand. Since this is an energy-intensive industry, energy efficiency is a vital issue.

The issues that pose a challenge to the fertilizer industry are the availability and pricing of various hydrocarbon feed-stocks, the taxes and duties on finished form fertilizers, on various inputs including feed-stock and energy and the obligations under WTO.

A vibrant fertilizer industry is vital to the food security of our country. All stakeholders in the sector, guided by a pro-active and future-focused Government policy, will have to do their utmost to ensure that the industry not only survives but eventually thrives after successfully tackling these challenges.

The monsoons played truant in 2002 and the resultant havoc in fertilizer sales was compounded by the Government intending to make deep cuts into subsidies for fertilizer companies. Analysts opine that there might occur a deficiency of fertilizers in the country as many fertilizer units face difficult choices. fertilizer units with similar profiles have been grouped and put under the group-wise pricing policy, which does not reward efficient units. Your Company under the New Pricing Scheme would receive a substantially lower subsidy vis-a-vis that of the previous years. Notwithstanding this, the Company continues to make all efforts to aggressively bring down the cost of production further in an attempt to offset the impact of the new pricing policy.

Technology plays a major role in defining the importance of the fertilizer industry in agricultural production. In many places around the globe, briquettes of urea or mixtures of DAP and of potash are being applied below the soil and near the plant roots, increasing the efficiency of fertilizers. The use of this technology has resulted in increases in yield by a fifth, particularly in the paddy fields of Bangladesh, Vietnam and Nepal. This ‘high yields with less fertilizers’ model can become feasible in areas where farmers can afford no fertilizer at all. These are places where the use of fertilizers can be demonstrated to farmers, introducing them to the benefits.

YEAR UNDER REVIEW
2002-03 has been an unfavorable year for agriculture, and therefore, the fertilizer industry. There was a substantial reduction in the area sown with various crops both in the Kharif and Rabi seasons, resulting in a decline in food production by about 28 million tonnes from last year’s high of 212 million tonnes.

On an all-India basis, sales of Urea declined to 18.63 million tonnes this year from 19.75 million tonnes the previous year. Much less DAP was bought by farmers this year--5.43 million tonnes, compared to 6.16 million tonnes last year. MOP sales too dropped sharply.

Despite the difficult times, your Company’s market share of Urea in the south was higher by 4 percent at 20 percent and of DAP by 5 percent at 30 percent. Urea sales volume increased to 6.43 lakh tonnes this year from 5.77 lakh tonnes in 2001-2002. SPIC crossed the 1 million tonne mark in annual sales for the 23rd consecutive year. Market collection equalled 97 percent of sales realization, reflecting the higher efficiency of your Company.

Sales of Gypsum at 4.89 lakh tonnes was the highest recorded so far by your company. The previous best was 3.15 lakh tonnes.

Your Company wishes to thank its dedicated, dynamic and motivated network of dealers who have lived so well their role as channel partners in an industry characterized by large volumes.

Your Company posted a better operating profit of Rs.67.69 crore (Rs.31.23 crore) on a lower turnover of Rs.1654.57 crore (Rs.1721.98 crore) for the year. The increase in operating profit of Rs.36.46 crore, an improvement of 117 percent, was made possible mainly because of operational restructuring and the cost reductions thereof.

I had mentioned in my last year’s speech about the initiatives your Company was taking to restructure its long-term debt with the institutions. Your Company’s Corporate Debt Restructuring (CDR) proposal was referred to the CDR Cell by the Industrial Development Bank of India. The CDR Cell approved the package in March 2003 on certain terms and conditions for business and financial restructuring. Loans are being restructured at varying interest rates between 4 and 11 percent and repayment terms between 5 and 12 years, including moratoria of 2 to 3 years. The interest funding for two years will begin from 1 April 2002. The implementation of the CDR package will benefit your Company by way of reduction in interest cost and rescheduling of loans and will come into effect retrospectively from 1 April 2002. The Company is hopeful of the implementation of the CDR package and consequently, has reckoned a sum of Rs.41.10 crore as interest relief in 2002-03.

WINDOW TO THE FUTURE
Fertilizers will continue to be on your Company’s focus and it will leverage its brand equity to expand its market share among its customers. Your Company is committed to all stakeholders to performing its role as a corporate citizen and fully realizing its corporate social responsibilities; meaning that it shall continue to act on its corporate philosophy: Nourishing Growth.

ACKNOWLEDGEMENTS
In conclusion, I would like to express my appreciation for the dedicated and sincere efforts of all the employees of the Company. I wish to express my gratitude to my colleagues on the Board and to the Central and State Governments, the Tamilnadu Industrial Development Corporation Limited, financial institutions and banks for their unstinted support and encouragement. And to all of you, dear shareholders, I would like to place on record, on behalf of the Board and myself, our immense appreciation for your forbearance and patience in this difficult phase of your Company. I am hopeful that the debt-restructuring and other initiatives being taken by the Management would result in improvement of the Company’s fortunes in the coming years.

Thank you.