DIRECTORS' REPORT Dear Members, Your Directors have pleasure in presenting their 44th Annual Report of the company together with the Audited Financial Statement for the financial year ended on 31st March, 2015. During the year 2014-15, the turnover of the company was Rs.92.63 crore as compared to Rs.107.58 crore in the previous financial year. The turnover of the company declined by 13.90% from that of previous financial year due to decline of price of Methanol in the international market which has direct impact in the domestic market of Methanol and Formaldehyde. The company incurred loss of Rs.6.48 crore during the year 2014-15 against the profit of Rs.9.38 crore earned in the previous year. The loss incurred mainly because of increase of prices of domestic Natural Gas by the Central Government from 4.2 USD to 5.61USD with effect from 1st November, 2014 and low realization of product prices. The annual cost of Natural Gas was increased by 37% over the cost of the previous year. The other income earned by the company mainly by way of interest on fixed deposits of the company's surplus fund. The company has a subsidiary named Pragjyotish Fertilizers and Chemicals Ltd. incorporated in 2004. This subsidiary company has been defunct since its year of incorporation as the company couldn't implement the project successfully for which it was incorporated. Although the company is required to consolidate the financial statements of its subsidiary company with company in accordance with the Section 129(3) of the Companies Act, 2013 but same was not possible as the financial statements of that company hasn't been updated for last several years. It is therefore only the standalone financial statement of the company are placed before the members for adoption in the ensuing Annual General Meeting. The company has already written off entire investment made in the subsidiary in the successive financial statement over the years. State of Company's Affairs and Future Outlook The company has been in the petrochemical business for last four decades. The company is presently producing and marketing of Methanol and Formaldehyde. The company is having annual 33,000 MT installed production capacity for Methanol and 41,250 MT installed production capacity for formaldehyde. The company has also engaged a conversion agent to produce formaldehyde from Methanol having capacity of 25 MT per day at Raninagar, West Bengal. Indian petrochemical demand has been increasing by 10% per annum but the domestic annual production is increasing at the rate of 2.4% only. The deficit of the demand has been catered by import. Considering the increasing demand of the petrochemicals in the domestic market and to exploit the advantage of the Central Government's "Act East Policy" the company is implementing a new integrated 500 TPD Methanol 200 TPD Acetic Acid project along with a 5 MW Captive Power Plant at an estimated capital investment of Rs.1028 crores. This will not only help bridge the gap of demand and supply of Methanol and Acetic Acid in the country but also export to South East Asian countries, Nepal, Bhutan and Bangladesh. The Company also has the plan to produce more value added downstream products of Acetic Acid like Vinyl Acetate Monomer (VAM), Poly Vinyl Acetate, Poly Vinyl Alcohol, Purified Terephthalic Acid, etc. in future. Operating Results: The existing Methanol plant of the company has completed twenty seven years against its normal life of 15 years. This plant requires frequent maintenance of its equipments for production. Routine shut down for maintenance and frequent power cut by Assam State Power Distribution Company Limited affected optimum utilization of the Methanol plant during the financial year 2014-15. The company remained its same business of manufacturing and marketing of Methanol and Formaldehyde during the financial year 2014-15. Sales & Marketing: The company is marketing its products in North Indian States, Bihar, West Bengal and North Eastern States and also exporting to our neighbouring countries viz, Nepal, Bhutan and Bangladesh. The Company is giving importance to export its products for earning foreign exchange and better product price realization. The Company sold 12,645.82 MT Methanol during the FY 2014-15 against 8028.124 MT Methanol of the previous financial year. The total quantity of Methanol sold has increased by 57.52% in the year compared to previous year sales quantity. Besides the increase in total sales quantity from that of the last financial year the total turnover of the Company was less in the current financial year than that of the previous financial year. The reason of this reduced turnover in the current financial year is due to decrease in price of both the products in the domestic as well as the international market. The area wise sales quantity of the company's products in the year 2014-15 vis-a-vis in the previous year 2013-14 are as follows: Project Activities: The members of the company are aware that the company is presently implementing the integrated 500 TPD Methanol-200 TPD Acetic Acid project at an estimated project cost of Rs.1,028 crore. The project capital will be arranged through by issue of fresh equity shares and loan from the commercial banks. The company obtained almost all the necessary clearances from various statutory and administrative authorities for setting up the project and some other allied activities. The company awarded LEPCM contract for Methanol to Engineers India Limited and License, Engineering, Supply of proprietary items and supervision of Erection, Commissioning and Guarantee Test run of Acetic Acid project to Beijing Zehua Chemical Engineering Co. Ltd., China with overall project completion period of 36 months. Human Resource Management and Industrial Relations: The HR Department has been continuously playing a very important role in terms of sourcing competent human resource through recruitment, training and developing skills of the workforce, motivating the employees for achievement of company's goals and objectives. Importance has been given on providing various technical and behavioral training in house or outside for enhancing the existing level of skills and competencies of employees working across all levels in the company. During the financial year 2014-15, the company organized 15 no. of in-house and 12 no. of external training programmes. The Company organized sports and cultural activities involving employee's spouse and children as a part of its employee engagement initiatives at Namrup which has helped in developing sense of belongingness, developing positive work culture, etc. within the organization. In order to encourage and motivate employees' children in terms of achieving their academic laurels, the Company rewarded all such students who had scored distinguished marks in their Board Examinations. The manpower strength of the Company as on 31.03.2015 was 366 out of which 211 were unionised cadre and remaining 155 nos. were executive cadre employees. The total nos. of woman employees as on 31.03.2015 was 40 nos. The industrial relations scenario of the Company during year 2014-15 was harmonious and cordial. The issues raised by the Workers' Union and the Officers' Association were resolved amicably through dialogs. Dividend: The Board could not recommend dividend to the members for the financial year 2014-15 due to the loss suffered by the company. Amounts Transferred to Reserves: Since the company incurred loss during the year 2014-15 therefore no amount could be transferred to reserves. Changes in Share Capital: There was no change in the Share Capital of the Company during the financial year 2014-15. However, the authorized share capital of the company enhanced from Rs.350 crore to Rs.500 crore on 23rd April, 2015 by creation of 15 crore additional shares ranking pari passu with the existing shares of the company. Disclosure regarding Issue of Equity Shares with Differential Rights/ Employee Stock Options/ Sweat Equity Shares: The Company didn't issue any shares with differential rights or Employee Stock Options or Sweat Equity Shares during the financial year 2014-15. Extract of Annual Return: Pursuant to Section 92 (3) of the Companies Act, 2013 and Rule 12(1) of the Companies (Management & Administration) Rules, 2014 an extract of Annual Return, in form MGT -9, for the financial year 2014-15 is enclosed with this report as Annexure A. Board of Directors and the Number of Board Meetings: The Board of Directors of the Company is constituted as per the requirement of Section 149 of the Companies Act, 2013 and Clause 49 of SEBI Listing Agreement. Although, the company is a listed company required to appoint a woman director as per Section 149 of the Act and the listing agreement but the company hasn't been appointed till this date as the company is in the process of delisting. Once, the company is delisted the requirement of appointing woman director will not be applicable. Shri Ram Tirath Jindal, Shri Paban Kumar Borthakur and Shri A. N. Das were reappointed as Directors of the company in accordance with the Section 152 of the Companies Act, 2013 in last Annual General Meeting. During the year, there were three changes in the Board of Directors of the Company. The Government of Assam and Assam Industrial Development Corporation Limited had appointed Shri V.B. Pyarelal, Shri Swapnanil Barua and Shri S.K. Khare as Directors in place of Shri N.N. Barkakoty, Shri Rajesh Prasad and Shri Paban Kumar Borthakur respectively. The details of newly appointed Directors are given as under: 1) Shri V B Pyarelal, IAS Shri V.B. Pyarelal is an Indian Administrative Service (IAS) officer of 1983 batch of Assam Meghalaya joint Cadre. He did his Graduation and Post Graduation in Economics from University of Kerala and also completed M. Phil. degree in Social Sciences from Panjab University. He has been working in different capacities in Government of Assam and Central Government for more than three decades. Shri Pyarelal is presently serving to the Government of Assam as Additional Chief Secretary, Power and Public Enterprise Department, Agriculture and Panchayat & Rural Development Department. Shri Pyarelal is also member of Board of Directors of several State Govt. enterprises including Assam Industrial Development Corporation Ltd, Assam Tea Corporation Ltd., Assam Trade Promotion Organisation, Assam Hydrocarbon and Energy Company Ltd. Govt. of Assam and Assam Industrial Development Corporation Ltd. nominated Shri V B Pyarelal as Director of the company in place of Shri N N Barkakoty w.e.f. 26th February, 2015. Meanwhile, the Govt. of Assam by notification relived Shri V B Pyarelal as Director of the company and appointed Shri Shyam Lal Mewara, IAS , Additional Chief Secretary to the Govt. of Assam as Director in place Shri Pyarelal w.e.f. 21st July, 2015. 2) Shri Sameer Kumar Khare, IAS Shri Sameer Kumar Khare, is an IAS officer of 1989 batch of Assam Meghalaya joint cadre. Shri Khare graduated in Mechanical Engineering from Indian Institute of Technology (IIT) Bombay and post graduation in Ecology Environment Science as well as Business Finance after joining the services. Shri Khare worked in various capacities in Government of Assam, Govt. of Madhya Pradesh, Govt. of Chhattisgarh and in the Central Government in last 25 years. Shri Khare last served the Central Govt. as Joint Secretary in the Ministry of Defense and presently holding the post of Principal Secretary to the Government of Assam, Finance Department. Shri Khare is also a member of Board of Directors of Assam Gas Company Ltd. and Assam Hydro Carbon and Energy Company Ltd. and Numaligarh Refinery Ltd. Shri Sameer Kumar Khare was nominated as Director of the company by Govt. of Assam and Assam Industrial Development Corporation Ltd. w.e.f. 5th February, 2015, in place of Shri Paban Kumar Borthakur. 3) Shri Swapnanil Barua, IAS Shri Swapnanil Barua, is a senior Indian Administrative Service (IAS) officer of1997 batch of Assam Meghalaya joint cadre. He is a law graduate. Shri Barua has worked in different capacities under Government of Assam. He is presently holding the position of Commissioner to the Govt. of Assam, Industries and Commerce Department. He is also holding post of Managing Director of Assam Industrial Development Corporation Limited. Shri Barua is also member of the Board of Directors of Assam Trade Promotion Organisation, Calcom Cement India Ltd., Assam State Textile Corporation Ltd., Assam Small Industries Development Corporation Ltd., Ashok Paper Mills (Assam) Ltd., Cachar Sugar Mills Ltd, Industrial Paper (Assam) Ltd, Assam Ashok Hotel Corporation Ltd, Bamboo Technology Park and Assam Stare Fertilizer and Chemical Ltd., Assam Tea Corporation Ltd. etc. Shri Barua is also the chairman in Fertichem Ltd., Assam Syntex Ltd. and Assam State Weaving and Manufacturing Co. Ltd. Shri Swapnanil Barua was nominated as Director of the company with effect from 22nd December, 2014 in place of Shri Rajesh Prasad, IAS. He is liable to retire by rotation in the ensuing Annual General Meeting and being eligible offers himself for re-appointment. During the financial year 2014-15, the company held 9 (nine) meetings of the Board of Directors and the gap between two consecutive meetings of the Board of Directors never exceeded 120 days. The details of the meetings of the Board of Directors held during the financial year 2014-15 are as follows: Particulars of Loan, Guarantees and Investments under Section 186 The company has not given any loan or guarantee covered under the provisions of section 186 of the Companies Act, 2013. Particulars of Contracts or Arrangements with Related Parties: The company didn't enter any related party transaction with Promoters, Key Managerial Personnel or other designated persons which may have potential conflict with interest of the company. Material Changes Affecting the Financial Position of the Company: There was no such material changes and commitments in the company which could affect the financial position from the date of the financial statements of the company for the financial year 2014-15 till the date of signing this report. Conservation of Energy, Technology, Absorption, Foreign Exchange Earnings and Outgo: The details of Energy, Technology, Absorption, Foreign Exchange Earnings and Outgo are as under: I) Conservation of Energy- A. Energy Conservation Measures taken: The process technology adopted in our plants is energy efficient even though it has become old now. The company selected the most developed ICI (Now Johnson Matthey) Low Pressure Methanol Technology and Humphreys and Glasgow (M/s Jacobs H & G Ltd.) Reformation Process for manufacture of Methanol & Derivados Forestales, Netherland's technology for manufacture of Formaldehyde. The waste heat is recovered to produce steam required for the process. Hence the heat is not radiated to the atmosphere. Water used for cooling in the plant is totally recycled to prevent pollution and loss. Steam condensate are recovered and recycled back from Turbo Generator. The plants are being operated to the full satisfactionof Pollution Control Board, Assam. B. The steps taken by the company for utilizing alternate source of energy: There was no such proposal in the year under review. C. Additional investments and proposals if any being implemented for reduction of the consumptionof energy: Replacement of existing lightings inside the factory as well as township with energy efficient LED lightings is under active consideration of the company. D. Impact of the measures (A), (B) & (C) above: The specific consumption electricity and fuel natural gas was well within the tolerance limit. The company has a pollution free environment. Per unit consumption of both Electricity as well as Natural Gas was achieved on lower side as compared with previous year. II) Technology Absorption: Research and Development (R & D) 1. Specific area in which R&D carried out by the company: The company so far has not started full time R & D activities except in plant improvement of process and debottlenecking. The company shall start R & D activities shortly to identify future diversification. 2. Benefit derived as a result of above R & D: Does not arise 3. Future Plan of Action: The company don't have the plan to establish any in house research and development facilities as on this date. 4. Expenditure of R & D a) Capital Not applicable b) Recurring Not applicable c) Total Not applicable d) Total R & D expenditure as per % of total turnover Not applicable III) TECNOLOGY ABSORPTION AND ADAPTATION i) The efforts made towards technology absorption, adaptation and innovation: APL has been operating the plant supplied by foreign supplier. ii) The benefits derived like product improvement, cost reduction, product development or import substitution etc.: Product quality improved & no pollution related issues faced. Cost of production increased due to higher price of raw material. iii) In case of imported technology (imported during the last three years reckoned from the beginning of the financial year -) (a) The details of technology imported : Does not arise (b) The year of import : Does not arise (c) Whether the technology been fully absorbed : Does not arise (d) If not fully absorbed, areas where absorption has not taken place, and the reasons thereof : Does not arise Foreign Exchange Earnings and Outgo: a) Activities relating to exports: Initiative taken to increase export, development of new export market for products and services and export Plans: Details of Subsidiary: Your company has a subsidiary company viz., Pragjyotish Fertilizers & Chemicals Ltd. (PFCL). This company was incorporated in 2004 jointly with another State Government undertaking Assam State Fertilizer Corporation Ltd. PFCL has not been carrying out any business since its incorporation. This company is under winding-up process. The Annual Accounts for the financial year 2014-15 have not been prepared and therefore the financial statements of the company could not be consolidated with the financial statements of the company as prescribed in Section 129(3) & 134(1) of the Act and Companies (Accounts) Rules, 2014. Business Risk Management: Although the company doesn't have any specific risk management policy as on this date, the Board of Directors of the company do deliberate on threats, risks and concerns which in opinion of the Board may threaten the continuation of its business or pose threat its existence in its meetings. The Board reviews the means adopted by the company to mitigate the risk from time to time. The details of risk and concerns of the company are discussed in the Management Discussion and Analysis Report. Details of Directors and Key Managerial Personnel: Details of the Directors and KMP of the company along with the Directors who were appointed or has resigned during the year are given in details in the Corporate Governance Report. Pursuant to Section 152 of the Companies Act, 2013, Shri Shyam Lal Mewara and Shri Swapnanil Barua Directors will retire by rotation in the ensuing Annual General Meeting and being eligible, offer themselves for reappointment as Directors at the same meeting. Statement in Respect of Adequacy of Internal Financial Control with Reference to the Financial Statements The Company has adequate internal financial control system in place. The company has also appointed a Chartered Accountant firm as internal auditor of the company for carry out audit. This enhances the effectiveness of the internal control system further. Deposits: The company doesn't have any outstanding deposit beginning of the Financial Year nor it accepted any deposits from the public during the year. Receipt of any commission by Managing Director from Company or for receipt of commission / remuneration from it holding or subsidiary: The company didn't pay any commission to its Managing Director during the financial year nor did the Managing Director receive any commission from its holding or subsidiary company. Declaration by Independent Director: All the Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement. As per the declaration given and noted by the Board of Directors, none of the Independent Director was disqualified to be appointed as Independent Director of the company as on 31st March, 2015. Independent Auditor: The present term of the Independent Auditors M/s L K Kejriwal & Co., Chartered Accountants is up to conclusion of the ensuing Annual General Meeting of the company. The company being a Government company, Comptroller and Auditor General of India vide letter no. / CA.V/ COY/ASSAM,APETRO (1)/69 appointed M/s SPRK & Co., Chartered Accountants, as independent auditor of the company for the FY 2015-16 as per Section 139(5) of the Companies Act, 2013. The company pays Rs.1,20,000/- (Rupees One Lakh Twenty Thousand Only) as audit fee to the independent auditors. Secretarial Auditors: Pursuant to provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014, the Company appointed M/s Amit Pareek and Associates, a firm of Practicing Company Secretaries to undertake the Secretarial Audit of the Company for the financial year 2014-15. The Secretarial Audit Report given by the secretarial auditors in Form MR-3 is annexed herewith as Annexure B. Cost Auditors: Pursuant to the Companies (Cost Records and Audit) Rules, 2014, the Company has appointed M/s K.K. Das and Associates, Durgapur, West Bengal, a firm Practicing Cost Accountants, to undertake the Audit of the Cost Records of the Company for the financial year 2014-15. Corporate Governance A certificate from a Company Secretary in Whole Time Practice regarding compliance of conditions of the Corporate Governance as stipulated under Clause 49 of the Listing Agreement is enclosed to this report as Annexure-C. Corporate Social Responsibility (CSR) Policy: A Corporate Social Responsibility Committee of the Board of Directors has been constituted as per requirements of the Companies Act, 2013. The Annual Report on CSR Activities has been annexed herewith as Annexure D. Audit Committee: The Company constituted an Audit Committee under the Chairmanship of an Independent Director of the company in terms of the Section 177 of the Companies Act, 2013 and Clause 49 of the Listing Agreement. During the financial year 2014-15 the company hold 4 (four) meetings of Audit Committee of the company. The details of the meetings of the Audit Committee held during the financial year 2014-15 and the roles and power of the Audit Committee are given in the Corporate Governance Disclosure annexed with this report. Annual Evaluation made by the Board of its own Performance, its Directors, and that of its Committees: Except the Independent Directors of the company, all other members of the Board of Directors were appointed by either the State Government or the holding company. The Chairman of the Board is a member of State Legislative Assembly with the status of a Cabinet Minister of Government of Assam and other non-executive Directors in the Board of Directors are very senior Indian Administrative Service officers in the state Government. These Government appointed Directors hold positions in the company as Director by virtue of their respective positions to the Government of Assam. The Board didn't do evaluation of performance of these Govt. of Assam appointed Board members because they undergoes performance evaluation at their respective offices or positions held in the State Government. Regarding the performance evaluation of the Managing Director, the Board evaluates his performance with the performance of the company from time to time. The company is to adopt a formal procedure for performance evaluation of the Independent Directors. This may also be stated that the Ministry of Corporate Affairs vide notification dated 5th June, 2015 has exempted the Government companies from evaluation of Board's performance to some extent. Nomination & Remuneration Committee Policy: Details pertaining to constitution of the Committee and its terms of reference in brief have been provided in the Corporate Governance Disclosure. Disclosure on Establishment of a Vigil Mechanism The Company doesn't have any Vigil Mechanism or Whistle Blower Policy. Managerial remuneration: The managerial remuneration has been discussed in the Corporate Governance Report. Disclosures under Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013: A committee has been constituted for monitoring and handling of issues related to the sexual harassment of women at workplace in line with "The Sexual Harassment of Woman at the Workplace (Prevention, Prohibition and Redressal) Act, 2013. There were no cases filed for Sexual Harassment of Women at Workplace during the financial year 2014-15. Corporate Governance Disclosure and Management Discussion and Analysis Report: The Corporate Governance Disclosure and Management Discussion & Analysis Report, which form an integral part of this Report, are set out as separate Annexure E. Directors Responsibility Statement: Pursuant to the requirement under Section 134(5) of the Companies Act, 2013 with respect to the Directors' Responsibility Statement, it is hereby confirmed that: (i) In the preparation of the annual accounts for the financial year ended 31st March, 2015, all applicable accounting standards had been followed, along with proper explanations relating to material departures; (ii) The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as on 31st March 2015 and of the losses of the Company for the year ended on that date; (iii) The Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (iv) The Directors had prepared the accounts for the financial year ended 31st March, 2015 on a 'going concern' basis. (v) The Directors, have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively. (vi) The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. Reply to the comments of the Auditors The Auditors of the company including the Comptroller and Auditor General of India have made certain adverse comments or remarks on the financial statements of the Company. According to the Section 134 (3)(f) of the Companies Act, 2013, it is duty of the Board to give its reply on the same to the members. Accordingly, the reply of the Board is given as Annexure- F. Acknowledgment: Your Directors place on record their appreciation of the unstinted support and encouragement extended by the Government of Assam, Assam Industrial Development Corporation Ltd., Banks, the valued shareholders, customers and the employees of the company. Your Directors also place on record their sincere appreciation to Oil India Limited for uninterrupted supply of Natural Gas as main feedstock for production of Methanol and Assam Gas Company Ltd. for transporting natural gas to the plant. For and on behalf of the Board of Directors Sd/- ( Ratul Bordoloi ) Managing Director Sd/- ( D. N. Barua) Director Place: Guwahati Date: 13.08.2015 |