Dáil Éireann debate -
Thursday, 5 Mar 1970

Vol. 244 No. 14

Nítrigin Éireann Teoranta Bill, 1969: Second Stage (Resumed).

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

Dr. O'Donovan

For once, I was glad to be on the same foot as the Minister for Industry and Commerce last night. I am sure the Minister did not particularly mind, but at least I was able to make the point that if you invest £6 million in something and you cut imports by £6 million without increasing prices at home, this in itself is a tremendous advantage to the economy. My criticism of the Verolme dockyard was of a different sort, entirely on a different basis, and was justified in my opinion.

About Nítrigin Éireann, however, the year after it was established—I was never in it although I have passed by it on several occasions—I was told by a man with a considerable scientific background who has a successful agricultural business in this city, that he was astounded this company was so successful. I was not a bit astounded at their success. I supported the idea in the other House and naturally when one supports something at its birth it gives one pleasure to see it doing well.

Perhaps I should say a word of commendation about the management of the company. I shall not mention names although names have been mentioned in connection with this company. The company have turned the town of Arklow into a boom town. It is a town that I go through fairly frequently. Were it not for the establishment of this company we would inevitably be brought back to the stage where the international fertiliser cartel could do what they liked to us. I have heard it said, I do not know with what truth, that the company have come to terms with the cartel. I do not think it matters particularly whether it has or not so long as our farmers get their fertilisers at reasonable prices.

Deputy Donegan raised the point about the State guarantees for borrowings by the company and said that the statutory limit had already been exceeded. The reason these companies are given State guarantees is because the rate of interest on an overdraft, if there is a State guarantee, is 1 per cent under the normal overdraft rate. I think the Minister was correct in putting the figure of £2 million into the Bill in place of the £1 million which was previously there because the company has an overdraft of £1.6 million.

Comment has been made about the £100 ordinary capital which companies like this have. I was around when that figure was decided on by senior officials in the Department of Finance. I could never understand why we could not have £10 ordinary capital. I know that a minimum of seven shares were necessary and then a few more shares were always added on in case it was necessary ever to prise out a director who had a share, so the figure of £100 was agreed upon. The odd position about this company is that the capital is now £4,712,100; it would not matter if it was £4,712,101, but it would look neater if it was a round figure.

One aspect of the Minister's brief which I did not understand was the end of paragraph 17 where he said: "...and leaves all options open in the future". I do not understand the significance of keeping all options open in the future. The reason for doing so is rather unusual. The Minister said earlier in that paragraph:

Under the 1963 provision, the Schedule to the 1963 Act, which in effect provides the machinery for the State's control of the company, operates as long as the Minister for Finance holds any shares in the company or any money is due to him by the company.

The fact is that the owner of the ordinary share capital of the company, as long as he is the majority shareholder, controls the company although he may only be able to exercise that control at the annual general meeting. It has taken a good deal of trouble to do this job. If I cast my mind back I would suggest that the reason is because the Department of Industry and Commerce is as overstaffed as it ever was, which gives them a lot of time to consider things which do not matter a fiddle-de-dee. There is nothing wrong with letting the interest accumulate in advance and dealing with it in this way. I have not the slightest doubt that this company will, in due course, give a return on the new capital belonging to the Minister for Finance.

In his speech the Minister makes an apology about a certain statement he made on the accounts of the company. It was good of the Minister to give this explanation about the way things have turned out but I do not regard it as a matter of great importance. The Minister also said:

I am putting it to the House that this is a reasonable way of restructuring the company's capital and of meeting the undertakings that have been given in respect of the original advances and the interest on them.

I am sure the Minister will be first to admit it could have been done in other reasonable ways, but I will not quarrel with him about the way he has done it.

Minister for Industry and Commerce (Mr. Colley)

I am grateful to Deputy Donegan and Deputy Dr. O'Donovan for their approach to this Bill. It is quite clear, if there was any doubt about this company before, that it now has the support of all sides of the House, both the practical support involved in enacting this legislation and also the very important moral support for its operations. This support is by no means misplaced. I think the performance of the company has indicated this.

I drew attention in my opening speech to a particular fact which I feel I should underline again, because it appears that I may not have made it quite clear. Deputy Donegan made the point when he said that the £6 million capital originally provided was not enough. There is a misunderstanding here. I want to draw the attention of the House again to the fact that the £6 million was provided for the original plant which was to produce nitrogenous fertilisers but, since the plant went into operation, in addition to the original plant, the company has installed and successfully operated the necessary plant for the production of concentrated complete fertilisers which is a very substantial item of CAN.

It has increased by three times its nitric acid capacity. It produces liquid carbon dioxide and supplies most of the market here for that and it supplies all the market for dry ice. These activities which took place after the company went into operation were not scheduled in the original estimation of £6 million. The company has managed to do this without a further advance from the State other than the fact that, as I have explained, some of the repayments which might have been expected were not, in fact, exacted from the company. I have also indicated that, in my view, this was the right course. I think the taxpayer has got excellent value for his money in the investment in this company.

As I tried to make clear, too, the financial gearing of this company was just not satisfactory. It was totally dependent on loan capital rather than investment capital and the proposals in this Bill, I think, produce a reasonable gearing which should enable the company to operate satisfactorily and, at the same time, to remunerate the capital involved to the State in the same way as any private enterprise commercial operation would be expected to do.

Deputy Donegan also referred to the rationalisation of the marketing operations of NET and the private enterprise sector and the close co-operation between them. This is true. However, I should like to make it clear, lest there be any doubt about it, that I have issued a directive to the company that, while I am glad to see the savings which are being effected as a result of this, the company is not to engage in activities which could be deemed to be the formation of a cartel or a monopoly with the private enterprise sector. This is not something that I want to see the company doing. The balance between rationalisation and a monopoly position is perhaps sometimes difficult to realise, but I am quite certain that no State company should lend itself to a cartel or monopoly situation in the market here.

Mr. Donegan

The Minister has his price control mechanism anyway.

Mr. Colley

Yes, but there are other factors in it besides price control.

Dr. O'Donovan

There are ways of getting around price control.

Mr. Colley

I should also like to point out, in case it might not be quite clear, that the original £6 million which was advanced to NET was given in several different instalments over the period from 1962 to 1965 and, as a particular instalment was paid, it became subject to the then prevailing rate of interest. These advances of money were at an interest rate of either six or 6¼ per cent. After the enactment of this Bill, interest at the rate of 6¼ per cent will be payable by NET to the Minister for Finance on the residue of £2½ million from the original £6 million advanced.

With regard to the investment in this, I should like to reiterate what Deputy O'Donovan said, that is, that we have here a company with a high degree of technology. Indeed, to appreciate just how high that degree of technology is, one would really want to visit the plant. It is quite an impressive operation. It is provided by Irish people and it is providing 700 jobs, I think virtually all male employment, and it is saving us very substantial sums in imports. It is also achieving a reasonable amount of exports. On any test it has been a very worthwhile operation.

I do not wish to argue with the figure quoted by Deputy Donegan. A lot depends on how you approach this question. It can be argued that, on the enactment of this Bill, the only investment, as such, by the State will amount to £4,712,000.

Mr. Donegan

The Minister would lose that argument with any businessman in the world.

Mr. Colley

This depends on whether you will have your advances repaid and your capital remunerated, does it not?

Mr. Donegan

In the circumstances the Minister would lose that argument.

Mr. Colley

On that basis the investment per worker would be £6,731, that is per job. I do not want to argue with Deputy Donegan but even if one accepts the figure which he arrived at, as he said, in this day and age it is not excessive for this kind of industry. The fact that it is an Irish Industry, Irish controlled, with Irish management and workers is a plus as far as all of us are concerned. I did not misunderstand Deputy Donegan. He was not complaining about this.

Mr. Donegan

No.

Mr. Colley

He was simply underlining this as a fact. Deputy O'Donovan referred to something I said in my opening statement. He was not making a major point of it and I will not make a major point of replying to it except to say that I endeavoured to explain what was being done here, which has been done in the case of other State companies. The existing legal provision is that as long as there is any share held by or any money due to the Minister for Finance, then State control over the company operates. The amendment as proposed in this Bill has the effect of saying that that control operates only in relation to the majority control of the shares or where there is any money due to the State.

This is largely academic because, as I pointed out, for quite a considerable time to come there will be money due to the State. Even if it came to the question of the shares, obviously the Minister for Finance, whoever he might be at any particular stage, would think carefully before he would dispose of shares and leave himself with either no shares or in a minority shareholding position. He would be in a position to impose such terms and conditions as would be necessary before he would be prepared to part with any shares if he decided so to do, or if the Government of the day decided so to do because that, in effect, is what would be involved. Therefore, it is, as I say, an academic question at the moment but it leaves open options in the future to the Government of the day as to whether they wish to maintain full State control, or partial State control and partial private investment, or full private investment. I think it is an advantage that these options should be left open to the Government of the day. I thank the House for the reception given to this Bill and I look forward to its enactment quite soon.

Question put and agreed to.

Agreed to take remaining Stages today.