India must invest $5bn in fertilizer industry over four years

13 February 2013 08:40  [Source: ICIS news]

KOLKATA (ICIS)--India needs about $5bn (€4bn) in new investment to boost its fertilizer production over the next four years and reduce its dependence on imported material, a government official said on Wednesday.

While the fertilizer industry is being de-regulated to allow a greater participation from the private sector, heavy investments from government-owned firms are still required, the official said, citing a plan drawn up by the Ministry of Chemicals and Fertilizers.

“An assessment has been made that Internal and Extra Budgetary Resources (IBER) of government-owned fertiliser companies would have to be around $4.77bn if [the]demand-supply imbalance had to be corrected and in interest of agriculture security,” the plan stated.

Investment in the sector “should be made attractive enough” to draw in private sector participation, according to the plan.

This government investment would be in addition to the $1bn fund earmarked for acquisition of fertilizer assets overseas, according to the ministry. India is keen on assets such as rock phosphate and potash in other countries, given its strong and growing consumption of fertilizers.

The Ministry of Chemicals and Fertilizer noted in the plan that targets for new fertilizer capacity creation were not achieved in the last five years because of shortage of feedstock natural gas or liquefied natural gas (LNG). This shortage led to delays in the planned conversion of some naphtha-based fertilizer plants into gas-based facilities.

Actual urea production in India based on current indigenous capacity of all functional units was at 22.2m tonnes/year, excluding the 16.5m tonne/year available from Oman India Fertiliser Co (OMIFCO) – an India-Oman government joint venture, according to the ministry.

This is lower by 6.5m tonnes or about 23% down from the targeted 28.7m tonne/year targeted for 2012 based on the government’s five-year expansion target.

By 2017, India’s demand for fertiliser nutrients is projected at 33.7m tonnes/year of urea; 12.4m tonnes/year of diammonium phosphate (DAP); 450,000 tonnes/year of muriate of potash (MOP); 11.4m tonnes/ year of complex fertilisers; and 590,000 tonnes/year of  single super phosphate, according to the ministry’s estimates.

The projections are based on current consumption pattern  and did not factor in variables, such as increase in irrigation spreads, changes in cropping pattern and growth in agriculture production, according to the ministry.

($1 = €0.74)

By: Ajoy K Das
+65 6780 4359

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