Hyderabad: A consortium led by Rashtriya Chemicals and Fertilizers Ltd (RCF), India’s largest fertilizer company by revenue, has pulled out of a bid for rock phosphate mines in Tunisia, peeved by the local government’s ambiguity over ownership and loan terms for foreign firms, said a member of the consortium.

The consortium, which includes NMDC Ltd, Gujarat State Fertilizers and Chemicals Ltd (GSFC) and Krishak Bharati Cooperative Ltd (Kribhco), was to submit a detailed bid for the $3.99 billion (Rs18,832 crore) project by 30 September.

Pulling out: NMDC’s chairman and managing director Rana Som says the consortium was worried about the possibility of losing the bond and bank guarantee if it had to pull out at a later stage. Bharath Sai / Mint

“The consortium leader, RCF, has decided not to go ahead with the investment in Tunisia," said Rana Som, chairman and managing director of NMDC, India’s largest iron ore producer and exporter.

Tunisia has rock phosphate reserves of 100 mt, according to the Food and Agriculture Organization, or FAO, of the United Nations, and the RCF-led consortium was keen on winning the bid.

But RCF objected to a stipulation by Tunisian authorities that the Indian consortium had to be the leader for raising loans for the project. The authorities also insisted that the Tunisian partners would not bear the economic risk of any losses.

“This condition, apart from being inequitable, thrusts the consortium to take the entire financial exposure. Under these circumstances, it would be difficult to convince the prospective lenders to finance the project," said P.G. Deshpande, deputy general manager (corporate), RCF.

Besides, there were uncertainties over basic infrastructure such as ports and railways, he added.

“Unless and until there is an assurance on infrastructure support from the (Tunisian) government, this could turn out to be a bad investment for India," said Som of NMDC.

The consortium was to submit detailed bids accompanied by a bond of $5 million. If it won the bid, it would have had to sign a memorandum of understanding for the project with the Tunisian government by submitting a bank guarantee for 1% of the project cost, or about $40 million.

Som said the consortium was worried about the possibility of losing the bond and bank guarantee if it had to pull out at a later stage.

The other issue was over management control of the project.

“They (the Tunisian government) were inviting not only India but other countries also to give bids and they said the (foreign) ownership could be varying from 34% to 66%," Som said. “Now if we (the Indian consortium) are less than 50%, then the management control passes on to somebody else. If you invest money and don’t get the management control, then there will be a problem."

Analysts were worried the withdrawal would hurt India.

“The move by the Indian consortium to pull out of (the) process to acquire rock phosphate mines overseas will be a serious setback for the Indian government’s efforts to ensure rock phosphate supplies to the fertilizer firms in the country," said Manish Mahawar, an analyst with equity research firm Prabhudas Lilladher Pvt. Ltd.

According to the ministry of chemicals and fertilizers, India is one of the largest consumers of fertilizers and it meets a large part of its requirements in the phosphatic sector through imports of phosphatic raw materials and intermediates such as rock phosphate and phosphoric acid.

Som said NMDC was still interested in mining part of the rock phosphate project in Tunisia.

“But the project does not speak of mining only. It includes beneficiation and includes processing as well. The maximum cost (of the project) will go for processing and beneficiation," he said.

Beneficiation is the process of reducing the extracted ore into particles that can be separated into minerals and waste.