New Delhi: India is looking to partner South Africa in a project for setting up a 5 million tonnes (mt) phosphoric acid plant. Phosphoric acid is an important intermediate product used to manufacture the fertilizer diammonium phosphate (DAP).
The proposed project is likely to involve investment of Rs 3,000-4,000 crore; it is expected to be located in Phalaborwa, a town in South Africa’s Limpopo province, according to Shyam Lal Goyal, a senior fertilizer ministry official who was a part of an Indian delegation led by fertilizer minister M.K. Alagiri to the African nation last week.
“The South Africans want us to invest to the tune of half the total investment,” Goyal said.
The government could also persuade public sector Rashtriya Chemicals and Fertilizers Ltd (RCF) to invest in the project. Fertilizer ministry officials are likely to meet RCF officials soon. The government is also likely to seek private sector investment.
Essential supplies: Fertilizer minister M.K. Alagiri led an Indian delegation to South Africa last week. The proposed project is likely to involve investment of Rs 3,000-4,000 crore. Photo: PIB
If the proposed plant does come up, India will sign an agreement with South Africa to import phosphoric acid at less than international rates, Goyal said. “We are looking at saving Rs 250 crore annually on imports of phosphoric acid from this project,” he said.
Another fertilizer ministry official, however, expressed doubts over the project being executed. “Such proposals related to South Africa are not new. These have been around for a while, but have never materialized for one reason or the other,” this official said on condition of anonymity.
India imported 2.14 mt of phosphoric acid in 2010-11, 90% of its domestic consumption. Phosphoric acid is currently imported at $1,080 per tonne.
India should ensure that such projects take off given its shortage in the domestic market, an official of the Fertiliser Association of India (FAI), an industry lobby group, said. “Even if we get the product at market price, and no long-term price discounts are on offer, private companies will be interested as there is an assured domestic market. Companies are now interested in investing abroad,” he said. The FAI official didn’t want to be named.
Ideally, a plant should be an integrated unit for the production of DAP rather than just a unit producing phosphoric acid, said Tarun Surana, an analyst at Mumbai-based Sunidhi Securities and Finance Ltd. “It is easier to transport DAP in finished form rather than phosphoric acid. So it makes little sense not to have an integrated plant,” he said.
On 5 December, Mint reported that the government was making little headway in its push for fertilizer assets abroad.
Several deals for buying foreign assets are being negotiated by the government. On 10 August, Mint first reported that India was eying a 20-25% stake in Belarus potash company JSC Belaruskali for $6-7 billion (Rs 30,660-35,770 crore). India subsequently sent a delegation to Belarus, but the talks hit an impasse. Last week, Mint reported that a senior fertilizer ministry official was likely to visit Belarus to lobby for the deal.
On 6 November, Mint reported that India was being approached by several foreign governments and companies seeking investment in their fertilizer projects, but there had been little forward movement.
In October, Russia’s Acron Group approached India to invest in a new $5 billion potash mining project that the conglomerate is developing. Subsequently, Belarus approached India, seeking a stake in an up-coming potash mine that’s on the block.
In addition, there have been proposals from at least three countries—Canada, Russia and Belarus—seeking equity investments from the Indian government or companies in new mining projects in the past year and a half, but talks have not yielded results.