Dáil Éireann debate -
Thursday, 24 Jan 1963

Vol. 199 No. 3

Nítrigin Éireann Teoranta Bill, 1962 —Second Stage (Resumed).

Question again proposed: "That the Bill be now read a Second Time."

Sir Anthony Esmonde

Last night, I was discussing the siting of the factory and pointing out that personally I had nothing against the fact that the factory was in Arklow. At the same time, I was directing the attention of the House to the fact that the Money Resolution in connection with this Bill is for a sum in the neighbourhood of £6 million for a factory which will employ 300 people and that it did seem to me that it was rather an excessive State expenditure for the purpose of employing only 300 people. I was also stressing the fact that I had information that the nitrogen plant itself was not really an economic one in that it was too small but I suggested that it was conceivably possible that it was the intention of the Government to have such plant, even though it might not be as economic as a larger one, so that they could employ a greater personnel, have more operatives at work there, than would be the case if they had more up-to-date and modern plant.

This is a new factory in connection with which there is an opportunity to have all conceivable modern appliances. In the competitive world that lies ahead, particularly in the European sphere, in the event of our not having the Common Market—which appears to be somewhat doubtful now —we shall certainly have some form of extended free trade area or free trade association, I wonder would it be possible at a later date to change this plant without imposing a very heavy charge on the company concerned ? It may very well happen that if we have to negotiate a trade agreement—as assuredly we shall—possibly in conjunction with other countries who are already manufacturing nitrogenous fertilisers on an extensive scale, it may be necessary for us or for the firm to keep itself competitive by changing this nitrogenous plant and even though it may not give the same amount of employment as, obviously, it is the Government's intention it should give, it may still be necessary to do this in order to remain a viable concern.

The Minister did not deal very extensively with the envisaged free trade area or free trade association or, shall we put it, the liberalisation of trade here in association with other countries, whether in the Common Market or under a wider free trade agreement embracing the EFTA countries, the Six and ourselves, perhaps. He brushed it aside by saying that dumping was prohibited within the Treaty of Rome. The position still is that we have made application for full membership of the Common Market and leading Government spokesmen have assured us we are going to get into it in the very near future. Perhaps they have had reason to change their minds in the past few days—I do not know. Within that market, it seems to me we shall have to compete fully with up-to-date plants.

I stressed last night that a very big British firm had closed down production of nitrogenous fertilisers because they found themselves priced out of the market by up-to-date conditions prevailing in continental fertiliser plants. Has the Minister fully considered that? I think the House is entitled to some further statement on account of the vast expenditure involved here on the changes that will arise in the event of the free trade area or Common Market membership materialising. Does he envisage that we shall face seriously competitive conditions? Does he consider that with the small nitrogenous plant at present envisaged, we can remain viable? Are we able to face these bigger firms in Europe and their competition and if not, what will be our position in the free trade area? In all the trade discussions that have so far taken place of which I have any knowledge, existing trade facilities are always taken into account and might we find ourselves in the position that we could not impose any tariff, even though it was a free trade area? I want the Minister to deal with that position in relation to the wider free trade area of the Economic Community. Should we still be able to consider ourselves viable within Europe?

This is an important matter that concerns us not only as legislators voting money here and giving the Government permission to go ahead with a programme about which some of us have considerable reservations and doubts, but also it affects the firm itself and the 300 operatives who will be working there. There is no use in starting a nitrogenous factory and giving this employment, expending this money which is coming out of the pockets of the taxpayers or out of the pockets of those who have invested money in national loans and so on, unless it can be made an economic proposition. The House should get a full assurance on that point and the Minister should make a full statement on the implications of this factory in relation to the conditions of industrial development we all envisage within Europe on the basis of a wider free trade area.

This factory is sited in Arklow which has suffered considerably as a result of the closing of the mines and the consequent unemployment in the area. I have nothing against Arklow but it does not seem to be the best distribution centre in the State. Although the Minister has not actually given costings, certain agricultural organisations associated with the production of nitrogenous fertilisers have suggested certain figures of costings and I gather that the price delivered to the farmer will be somewhere in the neighbourhood of £11 odd. Does the Minister feel that it is possible to distribute these fertilisers from Arklow throughout the State to every farmer in the country at the same price? From what I know of CIE efficiency and the prices charged— and CIE will be the principal means of transport unless it is envisaged to send the fertiliser by sea from Arklow to Killybegs to supply Donegal—I wonder can it be delivered at the same price to farmers in Donegal and West Cork or in the more distant parts.

The House would need a statement on that aspect of the matter to re-assure the agricultural community that they are not, as Deputy Desmond aptly put it, paying a land tax on fertilisers. I should be grateful if the Minister would clarify the points I have raised. I have had advice on many of the technical matters that I have mentioned but it does not necessarily follow that technical advice is always correct. I hope the scheme will be a success as there is so much money involved in it and I shall give it my support, such as it is, with the reservations I have mentioned.

Mr. Clinton

It was made quite clear at the outset of this debate by Deputy Cosgrave, followed by the leader of this Party, that we would not oppose the Bill. The assurances given by the Minister were accepted as coming from a responsible Minister in possession of information and facts not available to us. Personally, from what I have heard from all my sources of information, I should have been inclined to oppose this venture. The case for the establishment of the industry seems to be based mainly on its employment content——

Minister for Industry and Commerce (Mr. J. Lynch)

Not at all. Please do not distort it. That is one of the least considerations.

Mr. Clinton

It is one of the strong points made.

Mr. J. Lynch

You said just now it was the main case.

Mr. Clinton

I am at a loss to know what is the main case. That is why I make this statement. If it is not employment, then what is it ? On what section of the economy is it conferring enormous benefits ? It is an expenditure of £6 million—£6 million badly needed for agriculture, where there is certainly insufficient investment. In a very short time, we shall be up against a very big unemployment problem for which we shall need a good deal of money for the establishment of industries—industries that will not involve an investment of £20,000 per worker employed. Those are my feelings.

I also feel that the industry is much too small to be economic. That is my belief from all the information available to me. At the moment ICI are establishing a nitrogenous fertiliser factory in Aden. They considered establishing a factory with an output of 700,000 tons per annum, but they considered that was too small. They considered that at that size it would be uneconomic. They now propose to build a factory with an output of 1.2 million tons per annum. The number of people they hope to employ in that industry is 300. It is difficult to see how we can have 300 people usefully employed in an industry a fraction of that size.

Another point made for this factory was that it would help our balance of payments to the tune of about £1 million per annum. If we are hoping to sell our produce to the continent, it is hardly unreasonable that we should buy something from them. It is one of the ways we could get into the continent at no cost to ourselves.

There is another figure about which I have very grave doubts. It was given by the Minister on two occasions. He gave as the cost of transporting fertiliser from continental ports the figure of £2 10s. I went to some trouble to find out what was the actual cost in the past year of bringing fertilisers from the continental ports to the various ports in this country. My information is that it averaged 29/- per ton.

Mr. J. Lynch

Those are freight costs. What about handling ?

Mr. Clinton

The cost to Arklow was from 23/- to 25/-.

Mr. J. Lynch

What about handling ?

Mr. Clinton

The fertiliser produced in Arklow will have to be handled, and I believe it will cost anything up to 25/- a ton for CIE to move fertiliser from Arklow to Cork. Those are the figures I have and it is only right I should give them to the House.

Mr. J. Lynch

They do not tell the whole story.

Mr. Clinton

I am not suggesting they tell the whole story, but they tell some of the other side of the story. The ICSMA report was commended to us as an objective report. But it is so similar to the Minister's report that I do not believe it is objective.

Mr. J. Lynch

I wonder would Dr. Crotty agree with the Deputy's views?

Mr. Clinton

I believe they got a lot of the information contained in their report from Nítrigin Éireann, from the same source the Minister has his information. Therefore I do not think it is an impartial report by any means. The NFA have gone into this. There is certainly no benefit to be conferred on the farmers. At present they are getting the cheapest nitrogen available any place. They have no grouse, and they are the only customers. They have opposed this up to the present. They see no reason for it. I am not suggesting they are completely right. They have not all the information. The Minister is in possession of information and costings, but has not given them to the House. It is unfair of the Minister to come in here and look for £6 million without giving such costings. He gives us his own personal assurance that he believes it is all right, but it would make everybody much happier if, coupled with that assurance, there were detailed costings to back it. Then we would not have to accept anybody's word. If for commercial reasons that is not possible, I fail to see why that sort of information could not pass in a confidential way between the Minister and the leaders of the Parties. However, I have not been long enough in the House to know why that is not possible. It certainly would put many people more at ease if they were in possession of all this information.

Mr. J. Lynch

If I had concluded last night, I would have been very happy to say how pleased I was at the reception this Bill had got, even though the support for the Bill expressed by the leading spokesman for Fine Gael, Deputy Cosgrave, and the Leader, Deputy Dillon, was qualified to a degree. I am disappointed that two other members of that Party have come in this morning and differed substantially from the view put forward by their two leading spokesmen on this matter.

I want to say categorically that this project is not a consolation prize for the workers at Avoca. The decision to establish the nitrogenous fertiliser factory at Arklow would have been taken if mining operations, in which pyrites are one of the commodities extracted, were never conducted in or near Arklow. The fact that pyrites were regarded at one stage as a means of providing sulphur as one of the raw materials for the production of ammonium sulphate was naturally something that was welcomed by the Government and by the committee entrusted with the examination of this project from the beginning. But pyrites were at no stage a sine qua non of the operation.

I may say at this stage that if the mining operations are resumed at Arklow at any stage and if it can be shown that the mining of pyrites, as well as of copper, will be an economic proposition, then it will be possible for Nítrigin Éireann Teoranta — for brevity, I shall call them NET in future—to convert the sulphur-producing side of the business to the use of pyrites and at very little cost.

I thought I had made it clear in my opening statement and in the explanatory memorandum that the important stage in the bringing of raw materials to a plant and the distribution of the end-product as far as costings are concerned is at the distribution end. I have been advised, and I am satisfied, that Arklow, from that point of view, is at least as good, if not a better location for distribution purposes than any other location in the country. In order to satisfy a point made by Deputy Esmonde, the intention is that the costs to the farmer of the end-product will be equated all over the country.

Deputy Dillon mentioned that during his period as Minister for Agriculture this general proposition came to his Department, as it had done to two of his predecessors. On each occasion, he said, certainly on the occasion for which he had responsibility, the Department of Agriculture were not struck by the idea of having our own nitrogenous fertiliser plant. I do not know what is the explanation of the view of the Department of Agriculture in those times. I can only suggest that it was before the use of nitrogenous fertilisers by our farmers became a significant factor in the farming economy, and the figures I have given the House, not only in my introductory statement but also in the explanatory memorandum, clearly show the spectacular increase in user of both sulphate of ammonia and calcium ammonium nitrate in the past few years, particularly the past three years, but generally over the past decade. I feel that if such an increase in user had been foreseen then, it is likely the Department of Agriculture attitude to the project in those days would have been different.

In this connection, too, Deputy Cosgrave asked why was there a sudden impetus given to this project after the second committee reported in 1961. The first committee, set up in 1959, reported to the Government but a decision to go ahead was not taken. A decision hung on a number of things during those few years. In 1959, the terms of reference given to the committee provided for a nitrogenous fertiliser plant based on the use of peat for gasification purposes. At or about that time, the Government had reserved the Blackwater bog in Offaly, which was being developed by Bord na Móna, for this purpose, if the committee's report proved it feasible to use peat for gasification purposes in the production of nitrogenous fertilisers. When that committee reported, they did so favourably. They suggested that nitrogenous fertilisers could be produced from peat as one of the means of producing a raw material. but just at that time the international grapevine in this business became operative and there was a sudden drop of about £4 to £5 per ton in the cost to the Irish farmer of nitrogenous fertilisers imported from Europe.

I do not think anybody here would suggest that it was because the producers of that fertiliser in Europe liked the colour of our farmers' eyes or their fields that that drop in price took place, but the Government decided at the time that as long as the farmers enjoyed these especially favourable rates, there seemed to be no justification for going ahead with the erection of a plant to produce nitrogenous fertiliser with peat as the means of gasification. Therefore a decision to proceed was not taken at that time, but another decision was taken and it was this: that a new committee be set up, largely formed by the members of the old committee, with the terms of reference that they were to keep the whole project under review, particularly having regard to the movement of fertiliser prices, and as well, they were not, in their reexamination of the project, or reappraisal of any aspect of it, limited to peat as a means of gasification. Therefore the whole range of a means of procuring raw material was open for examination by the committee.

In the meantime, this low level of import prices prevailed. The committee proceeded with their examination of the project, and used all the resources available to them within the country. These were not inconsiderable, because as Deputies have pointed out, the whole project was being considered since 1930 from time to time, with the assistance of all our specialised agencies in this particular type of activity, Bord na Móna, the ESB, Ceimicí Teoranta, the late Professor Wheeler who was mentioned on a number of occasions in the course of the debate, and the senior civil servants of the Departments concerned. These included not only Industry and Commerce but Finance, Transport and Power and Agriculture, so there was a volume of expert opinion built up already in the country, and the committee satisfied themselves, and so reported in 1961, that it was possible to establish a nitrogenous fertiliser factory at Arklow, using fuel oil from the Whitegate Refinery as a means of gasification, pyrites for the production of sulphate of ammonia which, as I have said, is only one side of the production end of the factory, and what was very important was that the end-products of ammonia and nitrogenous fertilisers could be produced at prices at least as favourable as the import prices still obtaining which, not to put a tooth in it, were dumped prices.

These dumped prices, while they are not as low now as they were when this report was first made, still continue at a level lower than obtains in any other country in the world, even in the home countries of the producers of these fertilisers. I ask anybody to look behind that story and ask himself why our farmers are enjoying these low prices by comparison with other countries. Is it not because everybody knew the Irish Government proposed to establish a nitrogenous fertiliser factory and that this was an obvious attempt to defeat that purpose?

Mr. Tully

Does that mean the prices are likely to go up, now the decision has been taken ?

Mr. J. Lynch

The prices are already going up. Some Deputy mentioned the existence of this combination of nitrogenous manufacturers called Nitrex who have come together with a view to ensuring that economic prices will be charged in future on the export markets so that they can now retain their profits. That movement is already witnessed in this country. There has been an upward trend in the import prices of these fertilisers notwithstanding that they are still much below the prices obtaining in their own countries.

Mr. Dillon

What about Chilean nitrates?

Mr. J. Lynch

I am afraid I do not know much about Chilean nitrates. We do not use much of it at the moment.

Mr. Dillon

We do not have to. We beat down the price of the nitrogen cartel by bringing in Chilean nitrates in the past. I brought them in myself.

Mr. J. Lynch

Chilean nitrates are not coming in here because the prices of continental nitrates are depressed and more favourable. Therefore, as long as these prices can be maintained, there is no prospect of the import of Chilean nitrates. The report of this committee, as established by their consultants and by the guaranteed performance of the contractors for this factory, is that nitrogen can be produced from this factory at rates at least as good as the specially favourable rates now enjoyed by the farmers.

Mr. Dillon

That is a very important undertaking.

Mr. J. Lynch

On that basis, if the Chilean rates cannot compete with the rates obtaining at the present time, there is little likelihood that they can compete with the prices at which our own fertilisers can be made available.

Mr. Tully

If the European cartel push up the prices to what they consider economic now, is there any proposal to try to get Chilean nitrates to replace them ?

Mr. J. Lynch

I am trying to explain that. Even if they do it in the meantime, our own production will be coming along. We say our own production can compete with existing depressed continental prices which are keeping out Chilean nitrates. Then, does it not follow that our production will equally keep out Chilean nitrates?

Mr. Dillon

That is when the factory is completed. In the meantime, is there not a danger of prices rising steeply ?

Mr. J. Lynch

In the intervening period and even in the succeeding period, fertilisers can be purchased by our farmers in any part of the world at the best possible rates—and that includes Arklow, Chile or Belgium.

Mr. Tully

That is after Arklow has been put into operation but what about the intervening period?

Mr. J. Lynch

I gave it on a few occasions when this project was mentioned in other contexts in the House. I gave it in connection with the Avoca subsidies for mining operations and in connection with the Supplementary Estimate which I sought in the House when the NET was set up originally. In checking through my brief, I find that I have given it in no fewer than four places in the course of my speech. Therefore, I do not think I could endorse any more the undertaking I have given as to there being no grant or subsidy assistance and no tariff or quota protection in any shape or form —and I am quoting from the first page of my brief.

I am surprised that Deputy Clinton has challenged the report of Dr. Crotty to the ICMSA as not being objective. I did not identify Dr. Crotty with that report, but the Leader of the Opposition did, even though I knew who was responsible for it. It is true that Dr. Crotty got all the information possible from NET when he sought it, subject to the close costings that are commercial matters and which, in any ordinary course of trade, would not be disclosed to anybody. Nevertheless, to any points he raised they said in effect: "Well, this is the position. If you want to check, you can go to ICI or to any other source in order to establish or knock down our contention." He was given every facility—as, indeed, anybody who on that scale sought facilities was given them.

There was no question of submitting the report to the Chairman of NET. In fact, the Chairman of NET did not know of its existence until the report appeared in Saturday's or Monday's papers, I am not sure which. Therefore, as far as NET are concerned, except for supplying Dr. Crotty with whatever information he required and supplying him with the name or identity of whatever source was necessary to check facts that Dr. Crotty needed to have checked, there was no question whatever of influencing him in any way.

Deputy Donegan last night questioned the cost per worker. Many Deputies on the other side referred to the fact that on the basis of this operation the cost would be about £20,000 per worker in order to create employment. The purpose of this is not simply the creation of employment. It is one of the considerations but not the important consideration. The important consideration is the establishment of a nitrogenous fertiliser factory to give our farmers the benefit of favourable prices and to ensure that our farmers, in conditions which are ever-changing will be cushioned against the operations and machinations of cartels and the like.

There are industries which, as every Deputy knows, are capital intensive and labour intensive. The capital intensive industries are usually the good basic industries, the ones that produce goods of high quality as a result of intricate technical and scientific processes but which, as well, give in general the possibility of having subsidiary industries established. As everybody knows and as I think was agreed on both sides of the House, ammonium is one of those important intermediate substances that can be utilised in many directions and for many industrial purposes. Deputy de Valera, in answer to Deputy Dillon, gave an indication of the type of subsidiary industry that might be established as a result of the setting up of the nitrogenous fertiliser factory. There are other examples beyond the plastics and synthetic rubber industries he mentioned. Take, for example, explosives, although Deputy de Valera suggested they would not be as important now as 15 years ago.

Mr. Tully

Forty years ago.

Mr. J. Lynch

Other examples are copper and sulphate; the use of nitric acid for other purposes; the manufacture of CCF, that is, concentrated fertilisers; liquefied carbon, and many other possibilities. However, again I am not using the possibilities for subsidiaries as justification for the setting up of the plant.

To come to the size of the plant, which was questioned by Deputy Esmonde, the plant will be capable of producing 150,000 tons of nitrogenous fertiliser, that is, between sulphate and calcium ammonium nitrate. While Deputy de Valera went a long way to show that the sulphate of ammonium was less efficient nitrogenous fertiliser than the other, nevertheless the trend seems to be that our farmers are using more and more of it. However, if the trend reversed and there were a greater concentration on calcium ammonium nitrate, then the factory would be capable of the proper adjustment.

As far as the economic size of the plant is concerned I am satisfied 150,000 tons per annum output is above the necessary minimum economic output size. In fact the contractors for this factory have in recent years erected about four factories which are less than half the output size of the Arklow project. Incidentally Deputy Esmonde also mentioned he could not understand why we should go ahead with this project when he knew of a factory which was closing down in England. I do not know to what factory he is referring but there is a known case of one of the important producers of fertilisers in England who are closing down one plant because it is uneconomic. Its gasification is based on hard fuel like coal and they are switching over to a new plant with gasification based on fuel oil. That is the only one I know of in Britain and there are obviously good reasons why such an inefficient plant should close down. Deputy Esmonde will be comforted to know that this will be one of the most modern plants, in fact, the most modern plant in Europe at the time of its commissioning and therefore there need be nothing to fear from other modern plants on that score alone.

I cannot agree with what Deputy Esmonde said about the cost per worker. He has worked out that the average wage will be £8 a week on the figures I gave here in the White Paper of £200,000 for salaries and wages for 300 workers including supervisory staff. I do not know how he worked out £8 a week because if I divide 300 into £210,000 it gives me an average of £13 10s. and anybody will work that out very simply. That is only a small point but it suggests that at least in some quarters there has been some hasty examination of this to find out what the bad points may be.

Deputy Esmonde also inquired what would be the position of this plant in free trade conditions. First of all, no matter what free trade conditions there are, assuming we are members of a common market or a free trading area, nobody would prevent our producing nitrogenous fertiliser in the most efficient manner possible and charging prices to our farmers or to anybody else on that basis. If there are cartels or combinations within the trading group of which we shall become a member, then that trading group could not force our native factory to increase its price.

If, on the other hand, we were a member, let us say, of the Common Market, then the difficulty for outsiders who send nitrogenous fertilisers into this country would be affected by the common external tariff over which we as a single member would have no unilateral control. I do not know what kind of assurance Deputy Esmonde needs beyond that but I can only say that whether we are in or out of the Common Market the assurances I have given as to price will obtain.

I am just reminded I may not have dealt fully with the specific question Deputy Norton raised whether the factory could revert to pyrites as a source of sulphur. The answer is "yes" and of course again that will depend on the price that pyrites will be made available to the factory. I think I have dealt with all the points that have been raised. I appreciate that the House has carried on an objective debate on the proposition. I am glad I have got such unqualified approval from Deputy Norton and also that I have got the approval of the Fine Gael side of the House, even though there were shades of qualification among the different members of the Party in their contribution.

Mr. Dillon

I should like to make it quite clear that the approval he has received is entirely and completely dependent on his personal undertaking to this House that the farmers of this country will have free access to the supply of nitrogen whensoever they may choose to look for it.

Mr. Clinton

Would the Minister like to comment on the number of people it is proposed to employ in an industry of this size when ICI say they can produce 1.2 million tons with the same number of people employed ?

Mr. J. Lynch

I meant to deal with that although I do not think it was raised here before even by Deputy Clinton.

Mr. Clinton

Yes, it was.

Mr. J. Lynch

It was raised through the newspapers and otherwise. It was suggested that ICI were capable of producing more than this plant could produce and employ far fewer people. As I said, there will be 300 people employed here. There would be four shifts around the clock every day and every week. Therefore on an average, taking 300 people as the number employed, about 65 to 70 people will work on a shift. The figures that have been given in respect of ICI as a plant producing slightly greater than the output here were 95 or 98. I can only assume that the figure of 95 or 98 applies to one shift and corresponds to our figure of 65 to 70 in respect of the same working hours.

Question put and agreed to.

Committee Stage ordered for Wednesday, 30th January, 1963.