RCF proposes overseas arm RCF Videsh on lines of OVL
The state-owned fertilizer maker has proposed setting up the subsidiary to buy assets and form joint ventures abroad
New Delhi: State-owned fertilizer maker Rashtriya Chemicals and Fertilizers Ltd (RCF) has proposed setting up a subsidiary called RCF Videsh to buy assets and form joint ventures abroad on the lines of ONGC Videsh Ltd, the overseas arm of Oil and Natural Gas Corp. Ltd, two RCF officials and one fertilizer ministry official said.
The Union fertilizer ministry, which is studying the RCF proposal, has, on its part, suggested that RCF instead consider taking over Urvarak Videsh Ltd (UVL), an overseas joint venture (JV) of RCF, National Fertilizers Ltd (NFL) and Krishak Bharati Cooperative Ltd (Kribhco).
No final decision has been taken on the matter.
Since its inception in 2009, UVL has not struck any deal. According to the fertilizer ministry official, UVL did not take off due to the poor finances of NFL and Kribhco.
Setting up an overseas venture is important, given that India imports close to 90% of its requirement of phosphatic fertilizers, all potassic fertilizers, and more than a quarter of the urea it consumes, said one of the two RCF officials cited in the first instance. “Also, since Kribhco does not have a government stake in the cooperative anymore, we are unsure whether the PSU (public sector undertaking) status of the JV remains. Hence, a venture on the lines of OVL is vital,” the official said.
The two RCF officials and the ministry official didn’t want to be named.
Until last year, the Union government, through the department of fertilizers, held an equity stake in Kribhco, which is registered under the Multi-state Cooperative Societies Act. Internal delays have held up a final decision on the RCF’s proposal, said the fertilizer ministry official, who confirmed receiving the proposal. The ministry’s overseas JV department was recently shifted from a separate division for handling JVs to the phosphate and potash (P&K) division. Also, the ministry was without a secretary for most of June and July.
Many local fertilizer makers are under financial stress because of delays in subsidy payments, forcing them to borrow and pay interest on the debt.
An NFL official, who also did not want to be named said the company was keen on reviving UVL and a recent board meeting of UVL had discussed the possibility. The official added that the JV partners had been focusing on their individual expansion plans, resulting in UVL not making much headway. Kribhco officials could not be contacted for a comment on the matter. An analyst from a leading brokerage house in Mumbai, who requested anonymity because he is not authorized to speak to media, said that setting up an overseas arm made commercial sense. “RCF could procure cheaper urea from natural gas-rich countries which offer gas at a cheaper price. Or RCF could enter into joint ventures to mine rock phosphate in countries which have the resource,” the analyst said.
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Business NewsCompaniesRCF proposes overseas arm RCF Videsh on lines of OVL
First Published:11 Aug 2014, 12:27 AM IST
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