Hyderabad: Hyderabad-based fertilizer firm Nagarjuna Fertilizers and Chemicals Ltd (NFCL) has submitted a proposal to the Union government seeking permission to revive the ailing fertilizer facility of Fertilizer Corp. of India Ltd (FCIL) in Andhra Pradesh, involving an investment of up to Rs10,000 crore in two phases.
FCIL’s facility is located at Ramagundam in Karimnagar district, about 240km from the state capital. The unit, built at a cost of around Rs217 crore, began operations in November 1980 and was closed in April 1999 “due to non-availability of sufficient budgetary support from the government of India”, according FCIL website.
The township of FCIL’s Ramagundam unit also has about 1,200 acres of land in addition to unused plant and machinery.
NFCL has a fertilizer facility at Kakinada on the coast, with a capacity of 1.35 million tonnes and revenue of Rs2,212 crore and a post-tax profit of Rs22.49 crore for the fiscal ended March.
It is in the process of expanding its urea capacity to 1.5 million tonnes with an investment of at least Rs200 crore by the next year.
“We have submitted a revival proposal to the Union ministry of fertilizers involving around Rs5,000 crore of investment in the first phase and another Rs5,000 crore in the second phase,” said Pashu Pati Singh, director (technical) with NFCL.
Singh said he expects the ministry to approve the proposal soon because the government has said it wants to increase urea production in India and revive FCIL’s ailing fertilizer units.
The revival proposal almost amounts to setting up a greenfield project since the existing plant and machinery at the Ramagundam unit are now obsolete, said Singh.
“Though the existing plant and machinery has to be disposed of as scrap, the rest of the physical assets can be used with some modifications,” he said.
Singh said NFCL plans to set up a capacity of 1.25 million tonnes a year in the first phase, using natural gas as feedstock.
“We plan to take up the second phase at Ramagundam with 1.25 million tonnes capacity using coal gasification, taking advantage of the coal reserves in the area. We are currently in talks with an Australian company for acquiring the necessary technology in this regard,” Singh added.
NFCL has already taken up the issue with the state government, which, in turn, has sought clearances from the Union government for transferring the land and assets of FCIL’s Ramagundam unit in favour of the Hyderabad-based fertilizer company, he said.
The state government, “which already holds close to 5% equity holding in NFCL, will also have equity stake in the project in lieu of land and the project will be developed on public-private partnership model”, said Singh.
“The project will have a debt equity ratio of 2:1 and we are confident of completing the first phase of the project within 36 months from the date of financial closure,” he added.
On the strategic advantages of owning Ramagundam facility, he said: “The gas pipeline of Reliance Industries to transport its gas from the Krishna-Godavari basin is very close to the location. The project site will also have the advantage of the Godavari river for water supply. We can also cater to entire south (India) market from Ramagundam.”
NFCL is currently the only company in south India producing urea, Singh claimed. There are around 32 fertilizer companies, both public and private, in the country producing urea. The urea production units of fertilizer companies in the southern part of the country, such as Southern Petrochemical Industries Corp. Ltd and Fertilizers and Chemicals Travancore Ltd, were closed, mostly owing to viability issues on account of high cost of the main fuel, naphtha.
Singh said that while India has a urea production capacity of around 20 million tonnes, demand surpassed 26 million tonnes last year owing to good monsoons and high demand for fertilizers, forcing the country to import urea.
Imports of urea increased from 4.72 million tonnes during 2006-07 to 6.93 million tonnes during 2007-08, according to the latest annual report of the Fertilizer Association of India.
The gap between demand and production in the country is expected to grow to at least 10 million tonnes by 2011-12, said Singh.