Reliance mulls 2 big fertilizer plants in AP

Reliance mulls 2 big fertilizer plants in AP

New Delhi: Mukesh Ambani-led Reliance group propose to enter the fertilizer sector with India’s largest fertilizer plant.

“Reliance has made a proposal to set up a fertilizer plant at Kakinada in Andhra Pradesh. However, it is contingent on the new fertilizer investment policy envisaged by the government. The Reliance proposal is under consideration," said a senior fertilizer ministry official who did not wish to be identified.

“The proposal is for two plants, each of two million tonnes capacity. Kakinada has been chosen since it is close to the source of gas" from the Reliance Industries Ltd’s oil fields in the Krishna-Godavari basin, said a senior Reliance official who did not wish to be identified. However, the official maintained that the proposed fertilizer plant will not get gas at a concessional rate from the Reliance oil fields. “The plant will procure gas at the market determined rate. The delivered price of gas could fall between $5.8 to $6.2 per million British thermal units (mBtu)," said the same official.

Talk of the Reliance fertilizer plan for Andhra Pradesh comes at a time when the state government has openly opposed Reliance’s gas pricing plans and has pushed the Centre to not allow Reliance to move forward on pricing gas from the Krishna-Godavari basin. A significant proposed investment in the state from Reliance could now give the company leverage as a large fertilizer plant in Kakinada could also mean hundreds of jobs.

The Reliance move also comes at a time when the government is considering the deregulation of the fertilizer sector through a new fertilizer investment policy, first reported by Mint on 24 August.

The policy is aimed at reducing India’s dependence on increasingly costly fertilizer imports by incentivizing domestic production. The policy is likely to free any new capacity addition in the fertilizer sector of price controls. Experts believe that setting up of such a huge capacity facility could help bring down production costs for Reliance.

“Until now, the biggest plant urea plant in India has a capacity of only 0.86 million tonnes. By setting up a huge facility, Reliance can avail of considerable concessions in the purchase of capital goods," said a senior official of the Fertilizer Association of India(Fai) who did not wish to be identified.

A Reliance spokesperson declined to comment.