Nítrigin Éireann Teoranta Bill, 1969: Second Stage.

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

Minister for Industry and Commerce (Mr. Colley)

The purpose of the Bill before the House is to put the financial structure of Nítrigin Éireann on a basis more suitable to a commercial undertaking of this kind. Nítrigin Éireann manufactures nitrogenous fertilisers and is the only producer of such fertilisers in the country. In addition, it manufactures complete concentrated fertilisers, which include other nutrients besides nitrogen, as do two companies in the private sector of the fertiliser industry.

When the decision was taken in 1961 to set up a State company for the manufacture of nitrogenous fertilisers, there being no private industry in this field, NÉT was incorporated under the Companies Acts with a nominal capital of £100. The money needed for the undertaking was provided under the Nítrigin Éireann Teoranta Act, 1963, being £6 million to be issued from the Exchequer by way of repayable advances with interest. In addition, that Act provided that the Minister, with the consent of the Minister for Finance, could guarantee borrowings by the company up to £1 million.

The £6 million Exchequer advances were issued to the company in instalments as required by its development, and at rates of interest equivalent to the Exchequer lending rate at the time of each instalment. The interest which accumulated at these rates amounted to £1.212 million at 30th June, 1967, and to £1.938 million at 30th June, 1969.

The 1963 Act provided for the making of a determination by the Minister for Finance as to the terms of repayment of the advances issued to the company. No such determination has in fact been made and the reasons are these. The planning, construction, and plant installation of this major undertaking naturally took a fairly lengthy time. It is calculated that by the time the initial plant had been brought into operation, interest on the advances had accrued to the amount of £850,000.

It had also been apparent that changes were coming in the use of fertilisers and that complete concentrated fertilisers, which include nitrogen as well as other nutrients, would grow in demand. With the approval of the Government, the company undertook the installation of ancillary plant to produce such fertilisers. It also made a major extension of its calcium ammonium nitrate plant from 65,000 tons to a rated capacity of 140,000 tons to meet a growing market for this commodity. Furthermore, by-products arise in undertakings of this kind, and it makes economic sense to exploit them. Nítrigin Éireann at present produce the full requirements of dry ice for the meat trade and a substantial part of the carbon dioxide required by the mineral water manufacturers.

In these circumstances, it would have been illogical to look for repayment of the capital advanced to the company or the interest which was accumulating on it. What this Bill proposes is to convert into share capital, to be owned by the State, part of the advances, namely £3½ million, together with the interest on the £6 million which had accumulated to 30th June, 1967, a date taken more or less arbitrarily. The amount of interest to this date was £1.212 million. On the enactment of this measure, the company will issue to the Minister for Finance shares to the value of £4.712 million, representing the £3½ million advances and the £1.212 million interest. The balance of the original advances, namely £2½ million, will remain as a repayable loan together with the interest arising on it from 1st July, 1967.

The reconstruction of the company's capital on this basis will bring it more into accord with what a commercial undertaking of this kind should have. In the normal course of business where considerable amounts of credit have to be got and given, a company organised on the basis of a nominal capital of £100 must have obvious difficulties. There will be no loss to the State in making this reconstruction nor does it involve any State subsidisation of the company.

The company is satisfied that it can remunerate by dividend the State money that will now be converted into share capital and repay, by instalments to be determined, the loan capital of £2½ million that is being left outstanding, together with the interest arising on this from 1st July, 1967. I think that the company's financial returns for the past two years, when it has been fully in production, justify this expectation, although of course it has no immunity from the hazards of commercial life that can afflict any concern whether public or private.

In the year ended 30th June, 1968, the company showed a net profit of £329,372 after charging depreciation of £566,569. In its latest year to 30th June, 1969, the net profit was £581,960 after charging depreciation of £672,104. In neither case, of course, was there any charge made for the interest on the State advances, but the House will agree that these are impressive figures. It will also be seen from the company's accounts that the total cost of the fixed assets that had been installed at 30th June, 1969, exceeded £9 million.

The company has not been aided by way of grants, although State grants have been given to firms in the private sector for the establishment of plants to make complete concentrated fertilisers, nor is there any customs duty or other protection for nitrogenous fertilisers. I am speaking here of our normal tariff system; there has just been imposed, on the recommendation of An Coimisiún Dumpála, a customs duty against dumped importations of nitrogenous fertilisers from Portugal. The company supplies the Irish market at prices competitive with those in other countries, and has, from time to time, exported a number of its products.

Another change in financial provisions which is being made in this Bill, at section 6, is an increase from £1 million to £2 million in the amount that the company may borrow under State guarantee. It can be said that a large part of this increased provision will be used for the acquisition of plant to treat pyrites from the Avoca mines as a basic ingredient in the production of nitrogenous fertilisers. The use of these pyrites will replace imported sulphur on which the company has to work at present. The changeover to pyrites gets back to the basis on which the company was originally planned. It will be more economic for the company and will, incidentally, eliminate the importation of a considerable amount of sulphur from our purchases abroad.

Other provisions in the Bill deal, in the main, with the scope of the State's control of the company, and can be explained and discussed at a later stage.

I recommend the Bill for the approval of An Seanad.

Mr. Russell

I should like to say at the outset that the Fine Gael Party will give the Minister every co-operation in getting this Bill through the Seanad today in all its Stages, if the Minister so desires. As the Minister said, the Bill is largely a financial measure to regularise the present financial set-up of Nítrigin Éireann and from that point of view I do not think there is very much objection to the proposals he suggests. I should like, however, at a later stage, to suggest to the Minister—not indeed that I expect him to accept them—some alternative proposals which I think might be more in line with sound business practice.

To deal with the Bill in general terms, I must say that, as a Limerick man, I envy County Wicklow and Arklow the chemical fertiliser complex which has been established there by Nítrigin Éireann. Certainly, their record since they were established about four years ago is a most impressive one. The Minister did not mention in his speech here today, but he did mention it in the Dáil, that Nítrigin Éireann now employ more than 700 people. That is a very impressive record by any standards in any country and, even on the grounds of profitability, NÉT can boast of a very excellent record in their short history. I only wish that a somewhat similar development could take place in an area much closer to me in the Shannon estuary which the Minister knows something about. Indeed, I can see in the original notes I drafted some months ago, when we thought this Bill would be coming before the Seanad, I had an oblique reference to the possibility of establishing the ore smelter in the Shannon estuary. It now appears I might delete this reference from my notes.

I want, in congratulating Wicklow and Arklow on this development, and NÉT on their progress—and I am sure the Minister would agree—to impress on the Minister and the Government the necessity for regional development in a very real sense and to draw attention to the fact that one of the most important growth areas in the country, that in and contiguous to the Shannon estuary, up to now has been grossly neglected. I appreciate, as we all do, the reasons why Nítrigin Éireann was established in Wicklow at the time following the close-down of the mines there. I should like to remind the Minister and the House that, when the Silvermines operation closed down some ten to 12 years ago, no comparable effort was made to establish a worthwhile industrial development to take up the unemployment which unfortunately resulted as a result of that inevitable close down.

I saw recently in a reference to NÉT that they are having some difficulties with regard to the export of their products through the port of Arklow. I am interested in port development myself and wish every possible future success to the port of Arklow. However, I could not but be amazed at the fact that it was suggested a sum of £1 million should be spent on the port of Arklow to make it viable for the export of products from NÉT factory. I do not know if the Minister would like to comment on this possibility when he is replying, but I am sure he and the Government would be far more interested—and it would certainly be a far more logical development—in spending a sum of money like that, or perhaps even a little more, in the Shannon estuary where far greater possibilities exist for the entry of ships of literally any tonnage.

Since its establishment NÉT has made very encouraging progress. In fact, sales have increased from just over £2 million in 1966 to approximately £6 million in the year ended 30th June, 1969, which is a very fine achievement. The fertiliser industry goes through very difficult periods from time to time, as the Minister knows. It is affected by weather conditions and by outside conditions such as dumping and competition of one kind or another. Progress like this deserves the very highest commendation. The directors, management and workers concerned are doing a great job and deserve a warm tribute from this House.

I cannot help wondering—it is easy to have hindsight on these matters now —whether the original feasibility study which reported that the manufacture of nitrogenous fertilisers was a viable proposition was, in fact, a sound document. Reading through the Dáil Debates I noticed that the Minister stated that one of the reasons why NÉT was established at the time was because neither of the two large fertiliser concerns were making nitrogenous fertilisers. It was decided that NÉT would fill the gap. One wonders if these two companies, with their long experience in the field of fertiliser manufacture, were wise in their decision not to enter this field. After a very short time—I have no evidence to support the statement—but before the factory was built it must have been obvious to the promoters that they would have to engage in the manufacture of concentrated fertilisers to fulfil the demand for that type of fertiliser which is now accounting for about 90 per cent of the fertilisers used. These are the compound concentrated fertilisers. The decision was made and the factory was established. It realised the change in the market for fertilisers and, to its credit, it adapted its plant to manufacture the CC fertilisers, as they are called, within a very short period of time. Since then, as the Minister has pointed out, it has further diversified and if one is to judge by the intention of the directors in their annual report they hope to enter into further fields ancillary to the industry in Arklow. We in this House wish them every success.

The fertiliser industry, as most people are aware, is not for the small man. It is a giant industry in which only giants can participate. They require tremendous capital and they need to be in a position to withstand the inevitable ups-and-downs in the fertiliser industry due to the weather and the other reasons I have mentioned. Only very large companies such as ICI and the giant continental companies can hope to withstand the vicissitudes of this particular industry. It is only right and proper, if we are to have a State-sponsored industry in this field, that we should ensure it is properly financed not only to compete in existing conditions but to face the future. We could reasonably look years ahead and try to see what competition is likely and what developments are likely to take place over the next decade. It is obvious that the fertiliser industry, like every other industry, will change. With our anticipated entry into the EEC within the next few years there may be further vast changes in this industry. It is obvious that, unless NÉT and the other two major fertiliser industries in this country, are strong enough financially and technically to stand on their own feet they will be swept aside and we will be faced with a serious situation leading to substantial unemployment within a few years.

One of the dangers which exist in this industry is the possibility of monopoly arrangements. A pleasant term "orderly marketing" is not unknown in this industry. I am sure the Minister is very alive to the dangers of the big companies getting together and making arrangements in regard to production and distribution to suit themselves very profitably but not necessarily to suit the consuming public, which in this case is the Irish farmer. I see no objection whatever to two or three large manufacturers getting together for the purpose of rationalisation of distribution, and stocking and making other similar arrangements provided this is going to lead to greater efficiency and to lower costs which will be passed on to the Irish farmer. In many instances the charge of monopoly arrangements and cartels is unfairly levelled at companies which, through co-operation with other companies in the same industry or trade, bring about a situation whereby the ultimate consumer, whether it is the housewife or the farmer, gains from sensible rationalisation of distribution. Subject to this, I do not think we should cavil at a State company combining with two large enterprises to ensure that fertilisers in this country are distributed, by road or rail or other transport, to the Irish farmer at the lowest possible cost. After taking a reasonable return on the capital involved we must see that the Irish farmer gets his fertilisers at a cost comparable to that obtainable by the farmers in Europe. We should not cavil at the co-operation between the large companies, subject to these conditions. When the tariffs go and when we become a member of the Common Market, it is obvious that the Irish companies which look large to us in Irish terms will be quite small in terms of European companies. I would encourage industries in this country, whether manufacturing fertilisers or other things, to come together and to make arrangements for the benefit of Irish industry in the face of competition from very large continental firms.

I noticed while reading through the speeches of the managing director of NÉT, Mr. Hynes, and of Sir Basil Goulding of Gouldings—who always couches his speeches in very quaint language—that both gentlemen have severely criticised the Government for permitting in their last year—from June to June—the imports of substantial quantities of fertilisers which could have been manufactured in this country. Not alone could they have been manufactured in this country, but they could have been sold at prices comparable to normal European prices. The Minister, after a great deal of upset to the fertiliser trade and heavy unemployment, did take steps to ensure that this dumping—because it is dumping— was stopped.

I do not pretend to know all the ins-and-outs of this industry with its world-wide ramifications but I understand a gentleman's agreement has been made between the giant fertiliser manufacturers whereby surpluses in one country or another will be marketed or exported at not unreasonable prices. I suggest there is a genuine desire between the major manufacturers in Europe to discourage dumping but, at the same time, the question of what is a reasonable price is one that is obviously open to several interpretations. I am sure the Minister will keep that aspect of the situation in mind because last year, as he is aware, dumping caused considerable upset to our fertiliser industry and threatened quite widespread unemployment. This dumping also coincided with a difficult trading year and the chairmen of both these companies mentioned in their addresses to shareholders that, as it was a late spring last year, the spreading of fertilisers went very late with the result that heavy stocks accumulated.

The further point emphasised by the chairmen of both companies was that we have no tariff—I know that, through the Dumping Commission, the Minister can take quick action in the matter—on fertiliser imports, whereas European countries have a 16 per cent tariff on imported nitrogenous fertilisers. I assume that when we enter the Common Market these tariffs against us will go. I hope this will encourage manufacturers to increase their exports to Europe in spite of the heavy competition. Last year both companies made some headway in exporting fertilisers: NÉT exported about £300,000 worth and Gouldings exported about £500,000, although it must be remembered that Gouldings' exports are difficult to breakdown because they include products other than fertilisers.

One encouraging feature is that the demand for fertilisers over the years has increased. The demand for nitrogen has been going up. Over the last decade the consumption of nitrogen has trebled, the consumption of phosphorus has doubled and the consumption of potassium has more than doubled. It is obvious that, if this country is going to become, as we all hope it will, a supplier of beef and milk products and even possibly grain to the wider European Community, the fertiliser manufacturers can look forward to a substantial expansion of their business in the years ahead provided they can supply their products at competitive prices.

The fact that the Avoca mines have opened up again, as the Minister mentioned in his speech, has enabled NÉT to revert to the original proposal which was that it would draw its sulphur requirements from the pyrites at the Avoca mines and save the importation of sulphur from continental sources. I would point out that there are other sources of pyrites in other mines. NÉT should be encouraged to co-operate with other mining enterprises to ensure that pyrites are used to the maximum extent in the production and manufacture of fertilisers. I know that the late Deputy Sweetman and the late Deputy Norton would be very happy to see the Avoca fertiliser industry using pyrites from the Avoca mines. Both men played a great part in the early days of the mine and the fact that through circumstances outside the control of the Government the mine had to close down does not detract from their own efforts. As one who had some association with the mine at that time I know these men would be pleased that their dreams have been realised by the present Minister for Industry and Commerce.

I wonder if any consideration has been given by NÉT to the distribution of nitrate in liquid form. I understand that it is common practice to distribute liquid ammonia nitrate in England. I do not know whether it would be feasible to do so here but it is quite usual to see tankers going around distributing nitrate in liquid form in England. We also differ from England in the matter of subsidies. We subsidise phosphate and potash and in England nitrogen and phosphate are subsidised but potash is not. I do not know if the Government have ever considered subsidising nitrate.

I should like to deal briefly with the proposed capital construction. I agree in general with the proposals. It is obvious that the nature of the company's business and its progress to date make it imperative that it be based on a sound financial structure. The proposals which the Minister has outlined get away from the famous £100 company which was very popular a few years ago. I have often wondered why it was used. Some people took it as an indication that the company was going to be a failure. It is far better to establish a company with adequate capital than to establish a company with £100 capital in a business running to £5 million or £10 million. I think it discourages promoters and certainly if the wider investing public are ever called in to participate it also discourages them. The Minister's proposals, which have been accepted by the Dáil, provides for an increase in the nominal capital of the company from £100 to £6 million. The Minister proposes to convert £3½ million of the £6 million advanced by the Government into equity capital and issue shares for that amount, leaving a balance of £2½ million outstanding as a loan. In addition, it is intended to allow the Minister to issue shares for £1.212 million of the accumulated interest to the end of June, 1967.

I wonder if the Minister would be good enough in replying to say why he has decided on the date 30th June, 1967? Could he also give some indication of the accumulated interest at the end of December last? That would leave a balance outstanding of the accumulated interest which will remain. The result of that proposal will be to bring the issued capital up to £4.417 million, leaving the balance of £2½ million to be converted into share capital which will be payable on terms and conditions to be decided by the Minister, together with interest accumulated from 1st July, 1967.

Is it too soon—it does not seem to me to be too soon—in regard to an industry established four years ago and operating very efficiently and profitably, to ask what will the repayment terms be, or is the Minister waiting until this Bill has passed through both Houses before announcing these terms? The Minister has agreed that the limit on loans guaranteed by him will be increased from £1 million to £2 million. The reason for that extension in the Minister's guarantee became very obvious in June last year when guaranteed loans amounted to £1.8 million, £800,000 in excess of the then permitted guaranteed limit. I wonder what the figure was at the end of December last, to bring it nearer to the present date?

I should prefer that the increase in the nominal capital would be in excess of £6 million. I have already indicated the reason for this. It is, that I feel that in an industry like this, with the almost certain imminence of Common Market membership and the consequent requirement of capital for further development, this company should be financed adequately for future development so that we shall not be looking, as we seem to be, at the immediate future but towards the coming decade, and so that we shall not be talking in terms of a nominal capital of £6 million, which just about covers the company's present commitments, but of £8 million or £10 million.

As the Minister has stated, we must remember that the assets employed in this company are of the nature of £9 million and that therefore a capital of £8 million or £10 million is not inordinate and would not be extravagant in any further financial sense. I would convert the entire advance of £6 million into share capital. I do not understand why £3½ million is converted into shares and that £2½ million remains outstanding as a loan. I think it would be clearer and more logical to convert the entire £6 million loan into equity and ordinary shares.

The Minister may reply that it would be difficult for the company to service share capital of that kind, but I do not think it is unknown for share companies to fail to service equity capital for years or indeed, on a Kathleen Mavourneen basis, sometimes forever. I would not worry about that kind of procedure. I would prefer to see it done in that way. I should like to see all outstanding interest paid instead of having it converted as at present: I should prefer to see it all converted into shares. I should like to see what remains now, the £1.8 million, repaid, because that is a prior obligation on the company.

This idea of converting interest on loans into shares to my mind is basically a bad and unsound procedure. There may be good reasons why the Minister adopted this procedure, but to me it does not look sound finance. I would go further and try to ensure that the company have adequate capital by increasing the Minister's proposed guarantee from the suggested limit of £2 million to £3 million, again looking some years ahead. This capital reconstruction rearrangement only tidies up the existing arrangement and does not make any provision for the years ahead. We are living in rapidly changing times where costs are rising daily, where inflation will continue—I think so, anyway, and if somebody can prove to me that it will not I shall be very glad to hear it—where costs will go on escalating year after year.

The two most important considerations are the increasing use of fertilisers in our own country and the possibility of exporting to a wider market including many of the underdeveloped countries in Africa and elsewhere. Finally, from the financial point of view, I think shares in this company should be offered to the public here, perhaps not immediately but at some time in the not too distant future. I suggest that the Minister should consider offering at least a proportion of the shares of NÉT to the public. By any criterion that makes excellent sense, particularly in the case of NÉT who, after only a few years of trading, have done an excellent job. I cannot see why NÉT, with a capital of £8 million, should not be able to give a reasonable return to the Irish investing public. All of us who have a few pounds to put into shares now and again would much prefer to invest that money in a basically Irish industry rather than investing it in comparable companies abroad.

When the Minister is considering the points I have made, if he does not think they are too wide of the mark, I shall be grateful if he would deal with them. The Minister can be assured of the full support of Fine Gael in his proposals. Our feelings, if anything, would be that he is being quite modest in his proposals we should like to see him take time by the forelock and ensure that an essential basic Irish industry is properly financed, particularly an industry which is manned by technicians and management of high quality.

Professor Quinlan

It is pleasant to be able to welcome this Bill as a success story of one of our own endeavours. After six years, we find that the confidence we placed in NÉT has been more than justified. In 1963, it could have been felt that this was an area which might have been left to private enterprise rather than public development. I think the step has been more than justified and we should compliment in the highest possible terms the management of NÉT and, above all, their managing director who has done a magnificent job. He has proved that in our public service there are many people quite capable of facing up to bigger challenges and more imaginative work than they get credit for. The present managing director was in the Department of Industry and Commerce. It is very encouraging and refreshing to see the way he has met the challenge of getting this commercial enterprise going. The figures as given, especially the profits, are quite sound by any standards and the investment involved comes within the medium capital range. There are 700 people employed, and in good employment, for a capital expenditure of around £7 million, or £10,000 per worker involved. Those are the sort of figures we should be able to provide whenever other comparable opportunities arise.

It is also encouraging to see the way the plant has diversified in its by-products. When the opportunity is available they are to use pyrites from the Avoca mines and thereby cut considerably the cost of imports of raw materials. That is a step very much in the right direction.

However, with this success story behind us, I wonder why the Government seem to have lost their nerve, why the Government, when faced with a comparable undertaking—I refer to the development of the Irish smelter industry—have not faced this on a semi-State basis also where there seem to be prospects of good return and where there is a job to be done. I wonder why we have not benefited and learned from the success story of NÉT and looked in the same way at any other large scale tasks that remain to be done. Perhaps I am a little out of order in introducing this here, but I think the comparison is obvious and should not be lost on the public or on the Government before they make their final commitment.

What is rather unfair and somewhat puzzling in the present financial structure is the fact that the financing of this semi-State body did not get a grant in the customary way. I know it was financed from public sources but yet the accounting procedures are gone through and interest and everything else is charged up. I would have thought that this and all other corresponding semi-State undertakings should be put on a basis of direct competition with private enterprise. In other words, it is claimed that NÉT was able to do the job and would do it as efficiently and as economically as private enterprise. I feel they should be given the same starting point and that whatever measure of grant would be appropriate to this undertaking— probably it would be somewhere of the order of one-third of the capital, about £2½ million—should have been given. It would thereby make the achievement of the company more demonstrably competitive and it would also provide necessary capital for future development. I feel that the provisions here are a little on the skimpy side for future development, especially when we realise that the use of fertilisers is growing rapidly. With the impetus of the Common Market, or the hope of getting better markets for our products, the incentive to use more and more fertilisers is there. In fact, the booming conditions that prevail in the meat industry at present should bring about a great increase in the amount of fertilisers used on land for beef production. Conservatively, I would say that the output of NÉT should double within the next seven years. That is only asking for a 10 per cent growth rate per annum. In fact, I think that is much too low. The capital requirements are enormous. I hope that very shortly we will have another Bill before us to greatly increase the capital available to NÉT and also to make more adjustments in its financial structure.

I agree with Senator Russell that the shares of this and some other successful companies should be opened for public issue. Above all, I would like to see some shares in this company available for acquisition by its employees. The really sore spot in our handling and developing of semi-State companies is, unfortunately, our industrial relations. One would think that with the State, on the one hand, and the workers, citizens of the same State, on the other, we should be able to set a headline in industrial relations. That has been far from the case. As far as I am aware, the newer companies have not had these difficulties. Nítrigin Éireann Teoranta has had good staff relations, as far as I know, but now is the time to build on that and to see what we can pioneer through some of those companies.

I would envisage in a company such as this that the employees would be encouraged to acquire shares. In fact, they should be encouraged to work overtime and to convert that overtime into shares in the company. If we can get that mentality established, then when we meet the full challenge of the Common Market, if we do get in, we will find it is this that will see us through: workers will not feel bound by the strict letter of the law and will not regard their company and themselves as "they" and "us". If we can get the workers to identify themselves as being a very big part of the "they" we will be really gearing ourselves for whatever challenge the seventies may bring.

I appeal to the Minister to look into the possibility of using this very successful company to pioneer industrial relations in the semi-State bodies. I agree with Senator Russell that a big company like this has a great potential for growth and for developing a growth area. I share his concern that the Limerick region so far lacks this essential growth complex. In Cork we have a very healthy growth complex all round and I feel the Government would want to be a little fairer to the regions in the allocation of growth areas and growth potentials. I am precluded from developing the point, but what has happened in Arklow in a period of seven years shows what a growth complex can do.

But now we have to consider the other side of the coin: the question of pollution control and conservation. Unfortunately, in this context at present there are slight misgivings and a feeling of uneasiness about Arklow. Certain damage is being done to vegetation in the area, perhaps not overserious, but the beginnings are there. In common with all other countries—indeed we are more fortunate than most in this regard—we have a developing pollution problem and our industries will have to spend real money in seeing that pollution from their effluent is kept to the minimum.

In the case of a highly successful company like this, even through it may cost money—much of it, perhaps, Government money—and even though it may make a slight addition to costs, we should insist that their standards of pollution control are as good as can be enforced at this time and that they will set a headline and so perhaps get older industries causing greater pollution to face up to their responsibilities. I see Arklow having that double capacity.

I am a little disturbed that the extraction of sulphur dioxide in the flue there is not quite what it was anticipated to be I think there is 98 per cent recovery but that means a 2 per cent loss. That is too large, and with the expenditure of some extra capital for more treatment facilities, that could be brought down quite considerably. In fact, I believe it could be brought down to the region of a ½ per cent. If it did, that would be cutting the pollution from it by a factor of four.

Arklow is fortunate in that it is an area where there are not other factories contributing to the pollution problem and therefore it can be seen that what is there is due to the one factor. It is up to us to see that the industry develops and prospers but that it is not at the expense of the amenities of that very lovely area or indeed the introduction of rather undesirable living conditions within that area.

I welcome this Bill and I think it is only right and proper that we congratulate all involved because it is an Irish industry managed by Irish capital and the success of it is due to the splendid Irish scientists it has been able to recruit.

Miss Bourke

I do not claim to be a financial expert but I take it from those who know about it that this is a successful State-sponsored body. They should be congratulated for that. This Bill is an effort to allow them to expand as they are doing at the moment. My reason for speaking at this stage is because I am interested in the control of State-sponsored bodies and I speak with regret that we do not have in Ireland what I think we should have and what I hope to see in the very near future, an equivalent to the House of Commons Committee on Nationalised Industry: in other words, a committee sitting on State-sponsored bodies in this country, examining their finance and examining their control.

In looking at the Bill before us now and also in looking at the debates in the Dáil on it I am not very happy that there is sufficient control in view of the fact that so much of the money which originally comes from the taxpayer is invested in the company. I should like to refer to what the Minister said during the debate in the Dáil on the 5th March, 1970, reported in volume 244, column 2151 of the Official Report, speaking about control:

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.

There are two methods of control by the State. One is that the company owe money to the State, There is also the fact that the Minister for Finance would have a large shareholding in it. In looking through the Minister's statement introducing this Bill today I find that he says:

The company is satisfied that it can remunerate by dividend the State money that will now be converted into share capital and repay, by instalment to be determined, the loan capital of £2½ million that is being left outstanding, together with the interest arising on it from the 1st July, 1967.

He then goes on to say that the company's financial position is very sound. There is no indication how long it might take the company to repay but there appears to be an optimistic view that it would be quite possible quite soon to pay off the money owed to the Government which would leave the State-controlled part of the company entirely a matter of shareholding by the Minister for Finance.

When looking at section 4 I am not satisfied that the terms of reference provide for sufficient control on behalf of the people—in this case a State-sponsored body. It states:

The Minister for Finance may hold, for so long as he thinks fit, shares of the company acquired by him under the principal Act or this Act and may, as and when he thinks fit, sell all or any of those shares.

This is a very wide discretion to give to the Minister, to determine the future of this State-sponsored body. I should like the Minister to indicate, if possible, which type of control there might be by the Oireachtas on behalf of the people. I should like also to endorse what Senator Quinlan said, which I think is an excellent suggestion, that if there is to be selling of shares it should be said that this company are an ideal model for the type of industrial relations we ought to be fostering in the country and the first selling of shares ought to be open to the people employed in the company and that in some way there should be an accountability to the Oireachtas or some way in which we can influence the Minister's decision. It should not be entirely at the discretion of the Minister how he disposes of those shares if it is intended to release them some way to the public or to allow private shareholders to pay for shares in the company. I agree with Senator Russell when he says that he would like to see the amount of money raised from £2 million to £3 million. When reading through this Bill it would appear that very shortly we shall have a more brief amending Bill raising this money from £2 million to £3 million. I would be prepared to agree with Senator Russell that it would be better at this stage to allow the company to expand without having to come back for further capital, and that the amount should be raised to £3 million.

Finally, I should like again to endorse what Senator Quinlan said about the danger of pollution. I would have thought that in Conservation Year it would be possible in a Bill of this nature to introduce some provision requiring the company to take every measure to minimise the pollution which might be caused in the area of Arklow. I should be glad to hear the Minister's comments on what steps are being taken at the moment in this respect.

Mr. McDonald

I wish to make one or two points generally on the industry and the way it affects the consumer who, in this case, is the farmer in the country. I am not alone in the belief that the farming community are not getting a fair crack of the whip. I should like to draw the attention of the Minister to the rather undesirable practice of this particular industry, especially with regard to the advertising campaign during the past winter. I often ask myself have the fertiliser manufacturers in this country any agricultural experts or agricultural scientists on their staff at all? I feel that the advertisements were unfair.

There is one advertisement dealing with nitrogen which promises a new Mercedes car to anyone who applies nitrogen early in the winter. There is a second one which was shown all during January and February. It is not just good enough that these people can advertise their product in such a manner. It is not fair practice. I imagine that in any part of the country it would not pay anyone to apply nitrogen in January because we do not get growth of grass until perhaps the middle of April. Surely if there are agricultural advisers or graduates attached to those industries they should know that. They should know that growth does not start in the whole of the 26 counties on the same morning.

The advertising, which is widespread, must be costing a lot and it should be more specific. Those people are dealing with the farming community whose profit margin is extremely small, if it exists at all. I need not remind the House that the Minister for Agriculture said not long ago that farmers need £20 million of a boost in their incomes this year if they are to keep up with other sectors of the community. The farmers got £5 million last week in the Budget. This is an industry which cannot afford to be misled by advertising. The advice given does not apply equally to the whole country. Farmers, by looking at the television, are constantly exposed to this advertising and are being ill-advised. This is costing them much money.

I should like to comment on the irregular standards of fertilisers this year. I feel there are many farmers throughout the country who are not satisfied with the standards. This year a sign of irregular manufacture was the fact that the granules in the fertiliser that we applied to corn crops were extremely irregular in size and they did not flow easily. This caused much bother and work, setting and re-setting the machines very often. This is not good enough when we are paying £20 to £30 per ton for a commodity. Somebody should insist that the end product should be up to some standard.

This also raises the point that the fertiliser itself does not contain exactly what is written on the bag. I want to know whether the farming community are getting fair protection with regard to this. I should like to ask the Minister what was the outcome of the investigation or what action was taken by his Department this year when imported fertiliser was found not to stand up to the analysis that it was supposed to contain. I should like to know what protection the farming community is getting from the Minister's Department or from the Department of Agriculture. It is unfair practice if people present for sale—and I am not blaming the home industry but merely saying that fertilisers were imported and were found to be substandard—fertilisers which are not what they are represented to be on the bag.

Surely the Department and the Minister must be in a position to ensure that this malpractice does not continue. When replying, the Minister may be able to inform the House of the action which has been taken on this matter or on what action he intends to take. I should like also to remind the Minister that the present red-tape which is attached to having fertiliser analysed is altogether unworkable. It gives the farmer no chance whatever of getting a fair crack of the whip. It is almost impossible for him to have a sample analysed because first of all he must put on the sample he sends the analysis of what it should contain. I would prefer to send off a pound of the stuff in an unmarked bag. It would be interesting to see what answer would come back. I may be suspicious of the people in the laboratories and this may be unfair. This industry has done extremely well and surely on little points like this it would not cost too much to bring about some improvements so that the farmer will have faith in the product he is putting on.

This year those of us who have to work with the colder type of soil in which there is a later growth could have been taken in had we accepted the advice offered by this industry. I should also like to ask the Minister whether he allows this industry to increase the prices of their product each month from September until the present time. It appears to me and to many people like me that there is an increasing spiral in price with monthly increases from September last. I should like to ask the Minister if at some stage this year the prices will revert back to what they were last September. The farmers are being advised to buy early. The price keeps going up every month. Looking at last year's prices they had the same system but the price never went back to what it started at in 1968-69.

Mr. Colley

I am amazed to hear what the Senator is saying. Is the Senator referring to the fact that discounts are given at different times? Is the Senator putting it in reverse and saying that the price is going up whereas through discount it is coming down for early purchase?

Mr. McDonald

Last year prices never reverted to what they were the year before. This is the way these people have of evading the regulations on price stabilisation which the Department operate. I should like to have this matter investigated. It is something which leads to a lot of disquiet.

Though I compliment the company on the wonderful expansion they have achieved at their works in Arklow— great credit is due to any company who start from scratch and do the work they have done—nevertheless I am sorry to say the Irish farmer is paying the highest penny for this produce. We should try to ensure that Irish farmers get their fertilisers in the most favourable conditions.

Mícheál Cranitch

Níl sé i gceist agam ach cúpla focail a rá ar poinnte amháin. I propose to be very brief. Many complimentary remarks have been made in regard to the NÉT factory at Arklow. It is and has been and will continue to be one of the greatest Irish industrial success stories. It is due probably to the native genius when all conditions are favourable. It is due even more to the excellent industrial relations that have existed and that now exist in that factory. The pity is that such happy industrial relations do not exist in all our big undertakings.

The point I wish to make particularly is in relation to the container bags in which this excellent product comes. As we travel in the country from time to time we see not so much pollution as disfigurement of the countryside by NÉT bags strewn on the wayside, on hedges and in ditches, in corners of fields and, unfortunately, sometimes on the thoroughfares. It is offensive to the eyes, a disfigurement of the countryside, and it could react unfavourably from the point of view of tourism.

I wonder if something could be done about it from the factory point of view: I wonder could it be brought to the notice of NÉT that it might be helpful if some legend were printed on the sacks asking the users to destroy the sacks when they were finished with the contents. It is just carelessness in some areas. In some parts of the country we never see this disfigurement but in other parts the sacks clutter up the wayside. If my idea does not appeal, perhaps the Minister may have some suggestion to make.

Mr. Colley

I should like to thank the Senators who spoke for the welcome they have given to the Bill and to the achievements of NÉT. In particular, the tributes that have been paid to the management of the company are in my opinion well deserved. They are a company of which all of us can be proud. They are competing in a business against cut-throat competitors, against, as some Senators said, international giants, but they are not alone holding their own but they are proceeding to expand and to diversify in a way that could well be held up as a headline for a number of firms in other sectors of industry on the private enterprise side.

Of course, like any other firm, NÉT are a commercial operation and everything does not go smoothly for them all the time. They have many problems to face from time to time but by and large they have met those problems extremely well.

I shall try to deal with some of the points raised as best I can. Reference was made to proposals in relation to Arklow harbour. The Arklow Harbour Commissioners have commissioned a report on the harbour, but any action in this respect primarily would be a matter for the harbour commissioners and for the Minister for Transport and Power. I do not think it is a matter that could be dealt with appropriately on this Bill.

Senator Russell referred to dumping and I should like to take this opportunity to reiterate that dumping in the case of fertilisers can be and indeed has been dealt with under provisions which we have for dealing with dumping. It has been dealt with very effectively. However, in view of certain remarks made by Senator Russell, I think I should mention that it is my opinion that in this industry in particular on certain occasions in the past some people in the industry—I am not speaking at the moment of NÉT— expressed apprehension which was greatly exaggerated and also somewhat shameless, and played on the fears of the workers that their jobs might be lost. Those people tried to use those fears as a method of political leverage in an attempt to achieve certain things which they might not have otherwise been able to achieve.

There was reference also to the fact that there is tariff protection for this industry in Common Market countries and that we do not have it here. We have, however, anti-dumping provisions. When NÉT were set up, an undertaking was given, and has been and will be honoured, that NÉT would be obliged to supply nitrogenous fertilisers at competitive world prices. Of course this means genuine competitive world prices. It does not mean that NÉT have to compete with dumped prices. We demonstrated before, and we will do so again if necessary, that we are not prepared to tolerate dumping of fertilisers in this country on any scale which would be likely to cause material injury to our fertiliser industry.

Reference has been made to the proposed capital structure outlined in this Bill and some reservations have been expressed as to whether it is the right capital structure. The proposed gearing of capital involved is the result of a great deal of thought and advice and we are satisfied that it best meets the requirements of the company. I would draw attention to the fact that there is provision for more than £2 million of unissued shares in what we are providing for here which would mean that that additional amount of equity capital can be provided either from the Minister for Finance or other sources in the future if it is required.

Senator Russell took a rather different view of the situation from that taken by me in introducing this Bill. He said he would not mind if the total amount advanced by way of a loan from the State was converted into capital. He pointed out that a number of State companies either do not pay their dividends punctually or never pay them. On that score I want to make it clear that NÉT is a commercial operation, it is required to meet its obligations, in fact, the management of NÉT is very anxious to do this in order to demonstrate—if only for that reason —that it is a successful, viable commercial undertaking in competition with private enterprise both here and abroad and that it can compete on fair commercial terms.

The question of the conversion of a portion of the interest due into equity was objected to as a matter of principle. I regard the outstanding loan and the interest accruing on it as a loan from the State in substitution for capital which was not otherwise available to the company to enable it to carry out the various activities over and above those originally given to it, which I outlined when introducing the Bill. I think it is logical to convert the loan and the interest thereon into capital. The question of offering shares to the public or to the employees is something which will arise in future. Senators will note that the Bill as drafted leaves open every possible option as to what might happen to the share capital of the company in the future. It does not say whether it would retain State control or retain a certain portion of State investment; or whether all or a portion of it might be offered to the public—all these options are left open in the legislation as drafted here.

Senator Bourke referred to the general question of the control of State companies. I do not think I can enter into that general proposition on this Bill, it would be inappropriate and it would not settle anything in relation to this company or any other company. However, I should point out that Senator Bourke appeared to be under some misapprehension in that she seemed to think that the financial position of this company was so good that the loans referred to here would be paid off quite soon. I think she overlooked something said by me in the Dáil which was, in fact, quoted in this House today, where I said that this question was largely academic because the amount outstanding was unlikely to be paid off for a considerable time, so that the question of the State ceasing to exercise control of the company in the near future was academic. She thought that the £2 million limit of guaranteed borrowing provided for in this Bill should be raised to £3 million because we would be coming back quite soon and it is possible that we will. In the absence of any other general decision on the control of State companies perhaps we ought to welcome this because by having to come back the Oireachtas is given some measure of control over the activities of this company. We must be very careful about devising methods of greater control by the Oireachtas over such companies as NÉT. I am not decrying the possibilities of achieving such greater control but with a company like NÉT, which is a purely commercial operation working in a very competitive situation, one has to be extremely careful about the extent and nature of the control imposed on such a company by the Oireachtas if one is to ensure that such a company will continue to be a viable commercial operation.

I am completely mystified by some of the complaints made by Senator McDonald—perhaps I did not understand him. He complained about the advertising campaign of this company. He seemed to think that the company did not have available to it any expert agricultural advice. I want to assure the Senator that the company does have available the most expert agricultural advice. It appeared to me that he was complaining about the advertising policy of the company because the company advertises the sale of fertilisers very early in the season and offers discounts for its purchase early on. To the best of my knowledge it is possible for a farmer to take advantage of these discounts by purchasing early on and storing the fertiliser until he needs to use it. From the company's point of view this makes a great deal of sense because where a company is dealing with a seasonal product there is always the problem of maintaining an even throughput of work, especially in an industry where the employees are employed all year round. If this kind of discount induces more even sales and therefore greater possibilities of even production I think it is to be commended. I do not think the farmers are so ignorant of their business that they would be taken in by advertising which suggests that they buy fertiliser which they could not use. I think they know what to do with the fertiliser if they buy it early in the year.

Senator McDonald also seemed to imply that there was doubt as to whether the contents of the fertiliser provided by NÉT corresponded with that described on the package outside. He did not say this specifically but it seemed to me he was implying it. If he was not implying that I shall be very glad to hear that he was not but if he was it was a very unfair statement to make without some more detail and corroboration. It is the first I have ever heard of any such allegation. He went on to say something else which seemed to suggest that his remarks might have been taken to refer to some imported fertiliser. I am not clear as to which he meant but I have never heard of any such allegation against the products of NÉT and I would not believe for a moment that it was true. It would want to be proved to me very thoroughly before I would accept it. I have no reason whatever to believe that there is any basis for any such thing.

Mr. McDonald

It is the intention that the £2½ million plus interest will be repaid by annuity over probably 20 to 25 years. This will be determined by the Minister for Finance. As I said before, the Bill is so drafted as to leave all possible options open with regard to the future disposal of the shares in the company, either in whole or in part, I do not think there is anything further I need to add except to say that the company claim, and I have no reason to disbelieve their claim, that they have the highest possible standard of effluent and pollution control and the best and most efficient, from that point of view, sulphuric acid plant in the world. The company are very conscious of the dangers of pollution and are making every possible effort to control it.

The overall position in relation to this Bill seems to me to be one that is accepted by all the Senators who spoke. I thank them for their approach to the Bill and again for the congratulations which they have extended to the management which is, in my opinion. Well deserved.

Mr. Russell

I should like to correct two misunderstandings which the Minister has taken from what I said or appeared to say. I do not think I suggested that I did not care whether the equity capital was serviced or not. I hope I did not give that impression. What I said in effect was that it appeared to me the chairman's statement implied his confident predictions for the future that the company would be able to face a capital structure of, say, £6 million.

I would go on to say that it would not be the first time that such a company failed to service its capital. In fact this could apply equally to private enterprise. I did not intend the Minister to take me up as saying that I did not care one way or the other whether the capital was serviced or not. That would be an amazing statement from anyone in this House.

Secondly, the Minister was trying to get earlier on what was in my mind. I do not know what is in his but I can assure him that any notes I have prepared of investigations I made are completely confined to published documents and not through any personal contact with people in the industry. I hope the Minister will accept my statement in that regard. The chairman of NÉT stated as follows:

The second main difficulty more regrettable because it was unnecessary and avoidable was the heavy importation mainly from Britain of compound fertilisers coupled with a substantial import of nitrogenous fertilisers, from a number of Continental sources. I assume heavy importations of this kind would if permitted to continue, have an impact on our fertiliser industry.

I know other statements were made, as the Minister said. My source was the statement made by the chairman. I hope the Minister will accept that.

Mr. Colley

I accept the Senator's statement unreservedly.

Question put and agreed to.

Agreed to take remaining Stages today.

Seanad Éireann debate - Wednesday, 29 Apr 1970

Nítrigin Éireann Teoranta Bill, 1969: Second Stage.

Miss Bourke

An Leas-Chathaoirleach

Seanad Éireann debate -
Wednesday, 29 Apr 1970