Dáil Éireann debate -
Tuesday, 9 Dec 1980

Vol. 325 No. 4

Industrial Alcohol (Amendment) Bill, 1980: Second and Subsequent Stages.

Minister for Industry, Commerce and Tourism (Mr. O'Malley)

I move: "That the Bill be now read a Second Time."

The purpose of this Bill is to provide for certain amendments to the Industrial Alcohol Acts, 1938 to 1947 which relate to Ceimicí Teoranta, a State-sponsored company currently engaged in the production of industrial alcohol, potable alcohol and glucose. The main objects of the Bill are: to provide for an increase in the authorised share capital of Ceimicí Teoranta from £500,000 to £10 million, as a consequence, a similar increase in value of share capital which the Minister for Finance may take up; the guaranteeing by the Minister for Industry, Commerce and Tourism, subject to the consent of the Minister for Finance of borrowings by the company up to a limit of £10 million; the transfer of certain functions from the Minister for Finance to the Minister for Industry, Commerce and Tourism and the revocation of certain restrictive provisions in the Industrial Alcohol Act, 1947.

Under the Industrial Alcohol Act, 1934, the Minister for Industry and Commerce was empowered to undertake the manufacture, distillation and sale of industrial alcohol so as to provide an assured outlet for potatoes surplus to market requirements and, at the same time, to provide employment in areas where it was not previously available. Accordingly, five factories were established — one each at Carrickmacross, County Monaghan; Cooley, County Louth; Corroy, County Mayo; Carndonagh, County Donegal and Labbadish, County Donegal. This Act was superseded by the Industrial Alcohol Act, 1938, under which Monarchana Alcóil na hÉireann Teoranta was set up to manage the undertaking. The Industrial Alcohol (Amendment) Act, 1947, changed the name of the company to Ceimicí Teoranta and under this latter Act the company was given wider powers for research in relation to the manufacture of substances by chemical process and the manufacture and sale of such substances.

Although the original objective in setting up the company was to provide an outlet for surplus potatoes, from as early as the 1938-39 season, sufficient quantities of this raw material were not available to keep the five factories going and the company began to use imported sugar cane molasses to supplement the available supply of potatoes. In the early 1950s in order to rationalise the company's activities and in view of the overcapacity for production for the market then available, the Government decided that starch should be produced from potatoes at Corroy and Labbadish and glucose from the starch, also at Corroy. The production of industrial alcohol continued at Cardonagh and Cooley. Production of industrial alcohol continued at Carndonagh and Cooley. Production of industrial alcohol continued at Carrickmacross until 1954 and these premises were finally disposed of in 1962. The production of starch from potatoes continued seasonally at Labbadish until 1971, when, owing to a lack of raw materials, this operation ceased. Ceimicí Teoranta have continued to produce glucose at their Corroy plant, using imported maize starch. The company diversified into potable alcohol production in 1971-72.

Ceimicí's operations are currently, therefore, confined to the following areas of activity:

—Industrial and potable alcohol production at the Cooley, County Louth and Cardonagh, County Donegal distilleries and

—production of glucose at their plant at Corroy, County Mayo.

Industrial alcohol is sold to the petrol companies who, under the Industrial Alcohol Act, 1938 are obliged to purchase it in quantities stipulated by the company with the consent of the Minister for Industry, Commerce and Tourism at a price fixed by the Minister with the concurrence of the Minister for Finance. The price is fixed at a level adequate to give Ceimicí Teoranta a profit on alcohol production. A small proportion of industrial alcohol is also manufactured for use as a solvent and other related uses.

Potable alcohol is sold to Irish companies which require neutral spirit for the production of vodka, gin, white rum and certain liqueurs.

Liquid glucose is sold to producers of confectionery, chocolate, jams and so on, and Ceimicí Teoranta are the only native supplier of glucose to this industry which employs in excess of 15,000 people.

Employment by Ceimicí Teoranta itself is of the order of 150 persons and in addition imports of maize starch through Ballina harbour provide part-time employment for 33 men.

The company's activities were reviewed by the IDA in 1973 at the request of the then Minister for Industry and Commerce and following this review, the Government in May 1976 decided that the board of Ceimicí should be reconstituted and that the new board would be instructed, inter alia to phase out those activities found to be non-viable. They would also be instructed:

—to consider the possibility of association with another Irish firm in the field of potable alcohol,

—to study urgently the establishment of an integrated maize/glucose plant, perhaps in association with a major foreign producer and

—to examine the prospects for producing fine chemicals.

It was noted at that time that it could be necessary for the Government to give capital backing for any sound projects which might evolve and this would involve amending legislation to increase the share capital of the company.

The board was reconstituted with the appointment of three new members in 1977 and 1978 and a new chairman was appointed in 1977. Two new general managers were also appointed who are specialists in their own fields. For various reasons, and despite the best efforts of the company, it was not possible for Ceimicí to secure the interest of a joint venture partner in either the potable alcohol or glucose fields.

As the company were unsuccessful in their efforts to secure a joint venture in glucose, the board decided that the only realistic option was to refurbish their existing glucose factory at Corroy in order to maintain the company's position as prime supplier of glucose to the Irish market and to achieve viability in this product, while providing time for a new project to develop. The cost of the refurbishing — now £1.6 million — was approved in April 1979, to be financed by means of an IDA grant of £445,000 and temporary borrowings by the company of the balance of the finance required, pending the enactment of amending legislation which would permit an increase in the company's equity base. This is necessary because, of the company's existing authorised share capital of £500,000, £495,755 is paid up and held by the Minister for Finance. This equity participation is the only Government investment in the company.

In 1979 the company expended £150,000 on the Corroy project, all of which was borrowed, and, in order that the refurbishing of the Corroy plant can proceed with the utmost speed, the company have had to resort to further borrowings in 1980 to finance the project, which is expected to be completed at the end of this year. A provision of £585,000 from Exchequer sources had been included in the Public Capital Programme for 1980 but this capital cannot be provided to Ceimicí without amending legislation. Meanwhile, with the present high level of interest rates, the company are finding these borrowings an unbearable burden which can only be relieved by an immediate injection of equity.

In 1980 two major developments have occurred in relation to the future activities of the company. One of these has been the consideration by the company of proposals to refurbish and modernise their two distilleries at Carndonagh and Cooley. In considering the proposals account will be taken of the use of industrial alcohol in the context of gasohol production, which is a blend of petrol and alcohol. Studies into the use of gasohol have been undertaken in several overseas countries and in some countries — Brazil and the United States, for example — programmes involving the use of gasohol as a transportation fuel are already under way. Information available to me at present would seem to indicate that such a programme would not be a viable proposition in an Irish context due to the large difference in price between alcohol and petrol, alcohol being considerably more expensive. However, in the long term, with the ever-increasing cost of petrol and technological improvements, this situation may change. For this reason, further study of these possibilities appears to be warranted.

The second development in the company during 1980 has been the commencement of negotiations with an overseas company with a view to a joint venture in a milling/glucose/dextrose operation based on wheat.

The proposed new venture would be the largest of its kind in Europe producing starch and gluten for the home market and starch, gluten and animal feed for EEC and world markets and would provide a valuable spin-off benefit to the Irish farming Community.

Employment would be created for about 120 persons and the proposed new enterprise will be the first major manufacturer of gluten on the Irish market. The project will be of strategic importance in the development of the food industry, providing inputs for the flour and sugar confectionary industries, with the prospect of further downstream employment in these industries.

Negotiations on this project are now at an advanced stage and, while the details of equity provision and borrowings cannot as yet be finalised, Ceimicí estimate the main equity requirements at £4 million, £2 million for each partner. Ceimicí have also indicated that there may be several further stages of development in the project involving a doubling of investment and employment.

The company have also been actively investigating possible opportunities for the manufacture of fine chemicals, particularly in terms of a joint venture with an overseas company.

An increase in the authorised share capital to £10 million and provision for guarantee by the Minister for Industry, Commerce and Tourism of borrowings in a similar amount would allow for the financing of the Corroy glucose project and also provide the necessary financial backing for further projects which may be approved. The company have found in their negotiations on joint ventures that the fact that their authorised share capital is only £½ million is a minus factor. Although this level may have been adequate in 1938, it could hardly be considered realistic in 1980. In the circumnstances it is clear that a more realistic share capital base for the company is now necessary.

I am taking the opportunity in this Bill to seek the transfer of certain functions from the Minister for Finance to the Minister for Industry, Commerce and Tourism. These functions are mainly of an administrative nature and are being transferred on the recommendation of the Public Services Organisation Review Group.

Finally, this Bill provides for the repealing of sections 5, 6, 7 and 8 of the Industrial Alcohol (Amendment) Act, 1947. Sections 5, 6 and 7 of this Act prohibit the manufacture by Ceimicí Teoranta of certain chemical products except under licence from the Minister for Industry, Commerce and Tourism. This provision was originally intended to prevent Ceimicí Teoranta cutting across any chemical manufacturing operations being carried out in this country by private enterprise, but this position can be achieved without these legislative provisions, which have been found to have an inhibiting effect on possible joint ventures by the company with private enterprise.

Section 8 of the Industrial Alcohol (Amendment) Act, 1947, which provides that the Government may prohibit the importation of any specified chemical product, is contrary to our EEC commitments and it is accordingly necessary to repeal it.

I am confident that the Industrial Alcohol (Amendment) Bill, 1980, will commend itself to the Dáil and I recommend the Bill for its approval.

Mr. O'Toole

I am glad that the Minister has seen fit to introduce this Bill, with its provisions for the broadening of the equity share base of Ceimicí Teoranta. In his statement he has gone through the history of this State-sponsored body since 1934, since its establishment under the Industrial Alcohol Act. I have a special interest in this as one of the plants' locations mentioned is in my constituency. I have watched its progress down through the years. The Minister is right in saying that the production of industrial alcohol from potatoes had to be terminated because of the lack of this raw material.

The most welcome aspect of the current development in Ceimicí Teoranta is the work being carried on by the new board in the imaginative programmes they are initiating on their own in conjunction with other private bodies from abroad. From what I know of the plants operated by Ceimicí Teoranta, a debt of gratitude is owed to the staffs of these plants who in many cases worked with obsolete plant and equipment and kept the show on the road down through the years. As the Minister said, one of the inhibiting factors against any substantial progress was the fact that the company's authorised share capital was limited to £500,000. In the present day context this must be seen as a not too serious approach to business. This Bill provides for a major increase in share capital to £10 million and one cannot but express the wish that this will have a variable effect on the efforts of Ceimicí Teoranta to engage with outside companies in forming joint ventures for the production of certain chemicals and in doing so they will provide badly-needed employment here.

The Minister mentioned the production of gasohol and he is right in saying that in time it may become a feasible product. If petrol continues to increase in price at its present rate we might find that gasohol would be a cheaper energy agent even though at the moment it does not seem as competitive as the traditional types of energy. The second development during 1980 which the Minister mentioned was the negotiations with an overseas company with a view to establishing a joint venture on the glucose/dextrose operation. That would be a boost to the agricultural sector. Anything that can provide extra employment, and in so doing can provide an outlet for agricultural produce, is very well worthwhile. I hope this venture will meet with success and I am sure that hope is shared by the Minister.

The transfer of certain functions from the Minister for Finance to the Minister for Industry, Commerce and Tourism is a welcome measure in this Bill. A problem which comes to light now and again in times of strain on the economy is a general dissipation of effort because of the splitting of responsibility for different functions that exist in the promotion of economic development. The tie-up of functions under the one umbrella is a worthwhile and sensible approach to this problem. In this context, seeing that the Minister has seen this as a sensible and feasible approach, will he throw his net wider and apply the same principle in other spheres where other Departments have responsibilities in conjunction with his Department? There is no reason why this type of tidying up operation should not occur throughout the Departments.

I welcome the Bill because of the provision increasing the share capital from £500,000 to £10 million. This relieves Ceimicí Teoranta of having to borrow money at exorbitant interest rates which militates against their viability in the long run. That is the main provision in the Bill and it will give them some breathing space. With new ventures in mind and the new joint ventures for the production of gluten, that breathing space could be badly needed in the present economic climate.

Mr. Hegarty

I, too, welcome the Bill. There are very exciting possibilities in this area, expecially in relation to gasohol, which should be developed. I can accept the Minister's statement that gasohol might be uneconomical but there has been a lot of development in relation to making low grade fuels with gasohol and we should keep an eye on that aspect.

There has been an increase in the share capital to £10 million for the purposes of investigating areas where jobs may be created. A joint venture with an overseas company seems to be worthwhile and I hope this joint venture in glucose and dextrose will go ahead. We would have starch and gluten for the home market and starch, gluten and animal feed for export. The potential is very great there. In this area we can compete with anybody in the world. Some of our winter varieties of wheat are very high yielding. They may not be of the greatest quality for milling but they are excellent for these purposes. This is something that the continentals have not done much about, and perhaps we can get in first and capture a valuable market.

Not only would there be a substantial quantity of wheat involved but there is also the question of creating employment. The Minister was modest when he spoke of 120 people likely to be employed because in my view it could be a substantial industry if it takes off. If we plunge on this we will be well ahead of the UK and our European partners. French wheat is suitable for milling and is quite expensive but it is not suitable for a project such as this. We have a winter type wheat which is suitable and any extra sugar that might be available can also be used. I should like to encourage the Minister to delve into this area and ensure that the amalgamation takes place. There is nothing mysterious about it; it is straightforward. The market is there for it and we have the raw material in abundance.

Minister for Industry, Commerce and Tourism (Mr. O'Malley)

I should like to thank the two Deputies who spoke for their contribution in support of the Bill and their encouragement for the efforts being made in connection with this company's operations and proposed operations. Deputy Hegarty was right to lay emphasis on the starch side of its operations. There is great potential there. Surprisingly, European industry generally has not developed that side of things at all as much as the Australians have. I was glad when in Australia recently to be able to further in a significant way the joint venture proposals between this company and a leading Australian company in that field, Fielder-Gillespie. I referred to that in a statement I made when I returned from Australia.

The investment that is likely in the first stage of that proposed plan, which it is thought at this stage will be located at Ringaskiddy, County Cork, will be in the region of £10 million or £11 million. It is not a tremendously labour intensive industry but it is an important one because of the considerable amount of imports it will save and because of the utilisation of native wheat rather than the importation of starch. It was not until I became involved in the more detailed discussions with a company in Australia that I began to realise how little wheat we produce. This plant alone could use almost the entirety of the Irish wheat output each year.

Mr. Hegarty

I should like to tell the Minister that the reason we are not producing wheat is because of our difficulty in producing a millable quality wheat. The wheat we produce would be ideal for this purpose.

Mr. O'Malley

The millability in flour terms of the wheat is of less significance in the manufacture of starch. It may be necessary to adapt some of the strains of wheat but those who are expert in the matter do not foresee any difficulty in the growing of those different strains here. One would hope that the farming community would respond to the market which will be there for the production of increased quantities of suitable wheat for this project. The other field in which I see a future for this company if it can so arrange its affairs is in the whole field of fine chemicals. We have not had any State involvement in that field up to now. As a matter of fact we have only had limited Irish owned involvement in the field although we have quite a thriving fine chemical industry here. By and large it is a profitable industry and I see no reason why this company should not seek to get involved in it. I see no reason why the company should not make some money from it, avoid imports and create employment. We have people who are skilled in many aspects of the industry.

I do not believe any problems were raised in the course of the debate that I need reply to. I confined myself to speaking in a general way of the prospects I foresee for the company. It is important that I should avail of the opportunity to repeat that the company will have to become and remain profitable. In fairness, it has been profitable in the most years.

Mr. O'Toole

One of the very few.

Mr. O'Malley

Of course, it is in a rather privileged situation which I do not propose to go into now lest one of the reasons for its profitability has too much attention drawn to it. In these new ventures it is vital that it should become profitable. Having had my fingers burned rather comprehensively over the past few years by certain manufacturing State companies I will watch with avid interest to see that anything new that is undertaken becomes profitable at the earliest opportunity.

Question put and agreed to.

Agreed to take remaining Stages today.

Bill put through Committee, reported without amendment and passed.