BackIndia eyes phosphate projects in Russia to secure supply
Russian fertilizer maker Acron and a partner from India are in talks on jointly developing a phosphate project in Russia
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Mumbai: India, one of the world’s biggest consumers of fertilizers, is eyeing several phosphate projects in Russia to secure supplies, two senior industry officials said on Monday.
India is the world’s top importer of the crop nutrient diammonium phosphate (DAP) and accounts for nearly half of annual global shipments of around 16 million tonnes.
Russian fertilizer maker Acron and a partner from India are discussing jointly developing a phosphate project in Russia, according to the agenda prepared for a visit of Prime Minister Manmohan Singh to Russia on 21 October.
“We are planning to secure phosphate supplies from Russia on a long-term basis," said an official with a state-run fertilizer company, who visited Russia last month with other Indian fertilizer company officials to evaluate mines in the north of the country.
The officials asked not to be identified because the discussions are not finalized.
“There are two options. One is to import raw material and process it in India. The other is to process raw material in Russia itself and bring finished products like DAP to India."
Both officials said the governments of India and Russia might announce a broad plan regarding these projects, while details would be crafted in the coming months by the companies.
Acron, one of Europe’s top 10 fertilizer makers, declined comment.
DAP is the most widely used phosphate fertilizer in the world. Phosphate-based fertilizers are most commonly used along with nitrogen and potash-based fertilizers.
Logistics are the biggest hurdle to potential investment as the blocks offered by Acron and other Russian companies are based in the north, making it difficult to bring the material to India, the official added.
India usually imports more than 7 million tonnes of phosphate-based fertilizer each year, consisting mainly of DAP. The landed cost of DAP in India has fallen to $390 per tonne on a cost-and-freight (CFR) basis, from $520 per tonne in May due to weaker demand.
“Considering rising food demand, we need to secure phosphate, so we won’t be hurt whenever there would be a fluctuation in prices. Right now we are highly dependent on imports," the official added.
High valuations of new projects at a time when DAP prices are low are also an obstacle to investment in Russia. To share the risks, India may set up a consortium of three to four companies, mainly state-run, and then collectively form a joint company with a Russian counterpart, he said.
Another Indian industry official, who every year leads negotiations with overseas potash and phosphate suppliers, said that no fertilizer company is currently in a position to invest in any large project.
“All companies are facing a liquidity crunch due to a delay in subsidy disbursement from the government. Borrowing from banks is also not easy as interest rates are very high," the official said.
If the government provides some support to the state-run fertilizer companies, then they can move ahead and commit some investment, he added. Reuters
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