Bangalore: Fertilizer maker Zuari Industries Ltd is likely to spend $800-900 million (around Rs3,688-4,149 crore) to build a gas-based factory in Karnataka that would have a capacity to produce 1 million tonnes (mt) of urea a year.
The plant will be built in the Belgaum district bordering Maharashtra and Goa that has a gas pipeline running through it. Natural gas is a feedstock for fertilizer plants.
The company has asked for approval from the Karnataka government to go ahead with the project, a state industry department official said, speaking on condition of anonymity.
All investment plans exceeding Rs50 crore in the state require approval from a panel headed by the chief minister. The matter will come up for discussion at the panel later this month, the official added.
“It is in a very preliminary stage,” Zuari Industries managing director H.S. Bawa said over the telephone from New Delhi on Friday. “The project will progress based on the availability of gas.”
Zuari Industries and HT Media Ltd, which publishes Mint, are both part of the KK Birla group.
The firm will take around 40 months to build the factory once it inks a deal that ensures the supply of natural gas, Bawa said. The Union government has allocated about one-fourth of the 60 million standard cu. m per day of natural gas from the offshore KG D6 field of Reliance Industries Ltd to fertilizer companies.
An analyst said that Zuari Industries may be preparing itself to establish a new plant in anticipation of additional gas commitments.
There is unmet local demand for urea. India consumed 25.59 mt of the fertilizer in the year ended 31 March, of which 5.67 mt was imported, according to industry lobby group Fertiliser Association of India.
“India has much more gas than before. You will see lot of these guys (fertilizer companies) announcing new plants,” said the analyst who tracks the fertilizer industry at a Mumbai brokerage. “But the key thing to monitor is when they get the gas linkage.” He didn’t want to be named as he is not authorized to speak with the media.
“Probably, they (Zuari Industries) will keep all the approvals ready in six-eight months. Once the (gas supply) agreements are signed, they can begin work,” he said.
On 12 November, Zuari Industries said it signed a reliquefied natural gas supply agreement with GAIL (India) Ltd for its fertilizer plant in Goa. The expected date of supply of the gas to be used as a feedstock in place of naphtha is 1 January 2013, the firm told the National Stock Exchange.
Bawa said the firm supplies fertilizers from its Goa factory to Maharashtra, Karnataka, Andhra Pradesh and Tamil Nadu and would expand its base in these markets.