India’s BVFCL to shut urea production without $607m gov’t bailout

21 May 2012 08:07  [Source: ICIS news]

KOLKATA (ICIS)--Brahmaputra Valley Fertiliser Corp Ltd (BVFCL) will be forced to close down operations within the next few months unless the Indian government sanctions its $607m (€474m) bailout package for the northeast India-based urea producer, senior company official said on Monday.

“The company has been crippled by a debt burden of $128m. We have sought a revival package of $607m, including approval for equity infusion by Oil India Limited (OIL), to save the sole urea production unit in the region,” the official said.

BVFCL’s operations located in Assam province produces 390,000 tonnes/year of urea, against nameplate capacity of 520,000 tonnes/year. Three of the four urea production units at the site have been shut owing to shortage of natural gas feedstock.

As the units use antiquated technology, they require higher quantity of feedstock to produce a tonne of urea.

The proposed bailout package involves infusion of capital into BVFCL by Oil India Limited (OIL) and government-owned fertilizer companies, such as Rashtriya Chemicals and Fertiliser Limited (RCFL) and Gujarat Narmada Valley Fertiliser Limited (GNVFL).

India’s approval for OIL’s strategic investment in BVFCL is imperative for assured supply of feedstock.

BVFCL derives feedstock for urea production from OIL’s gas wells in northeast India, and with the energy firm becoming a strategic shareholder in the fertilizer firm, BVFCL will be able to increase its urea capacity by 66% to 864,000 tonne/year to achieve economies of scale, the official said.

OIL produces 2.35 bn metric standard cubic meters (mmscum) of gas and majority of its 13 drilling rigs and 14 work-over rigs were located in northeastern Indian provinces.

The participation of RCFL and GNVL in the revival package for BVFCL would ensure adoption of appropriate and efficient technology for optimal usage of gas and marketing reach in the urea-deficient region, the official said.

Engineering consultant Projects Development India Limited (PDIL) has completed preparation of a techno-economic feasibility report for BVFCL’s expansion project but its implementation has been stalled owing to lack of funding options, and could be put into play only if revival package was approved.

BVFCL’s shutdown of production is expected to aggravate the shortage of urea availability in India’s northeastern region, the official said.

India's total urea demand was estimated at 30m tonnes/year, against a domestic production of 21m tonnes/year.

($1 = €0.78)

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