Tata Chemicals to spend Sh1b to lay off 200 workers
Tata Chemicals Magadi workers harvest soda ash from Lake Magadi. The company plans to lay off 200 workers. Photo/FILE
What you need to know:
The company may “mothball” its Premium Ash Magadi (PAM) plant that is making losses due to high energy costs.
Upon the closure of the PAM plant, which accounts for about 40 per cent of the company’s total output, Tata will switch to its standard plant which is profitable.
Soda ash producer Tata Chemicals is set to spend more than Sh1 billion to retrench 200 workers by the end of this month when it expects to have closed one of its factories.
The Indian-owned firm is currently in talks with the affected workers and unions over the impending retrenchments, with the compensation negotiations set to be completed in three weeks.
Jack Muchira, Tata Chemicals managing director, told the Business Daily that once the payments have been made, the company would “mothball” its Premium Ash Magadi (PAM) plant that is making losses due to high energy costs.
This means the firm will cease operations at the factory but will keep it in good condition for a potential resumption of production in the future.
“We have offered the affected staff a lucrative package that will see us incur costs in excess of Sh1 billion, which our mother company has committed to settle,” Mr Muchira said.
“Negotiations are at an advanced stage and we expect to have completed them by the end of this month after which we will proceed to shut down the affected factory.”
This exercise will see the company retain a leaner workforce of 300 with the personnel being laid off mainly being those who operate the firm’s locomotive facility in Kajiado.
Tata Chemicals, formerly known as Magadi Soda Company, in late May announced that it would be shutting down the PAM plant which, since it was commissioned in 2006, has incurred losses accruing to Sh15 billion.
Soda ash is widely used in glass production and also manufacture of detergents and cleaning agents.
Upon the closure of the PAM plant, which accounts for about 40 per cent of the company’s total output, Tata will switch to its standard plant which is profitable.
The Economic Survey 2014 shows that soda ash earnings last year fell by 5.5 per cent to Sh8.86 billion from the previous year’s Sh9.38 billion, despite the fact that production increased by 4.2 per cent to 468,215 tonnes in the same year.
This discrepancy was brought about by a drop in retail prices last year, with the average asking price of one tonne dropping 11.3 per cent to Sh18,790 compared to Sh21,194 in 2012.
The survey noted that this decline “may be attributable to stiff competition from cheap synthetic soda ash”.
