Market and product

In a bid to augment the domestic production of fertilizers, India is looking to help set up captive capacities in West Asia and South-East Asia.

“India has signed a pact with Syria, and is in the process of working out agreements with Saudi Arabia and Indonesia,” said a senior official of the department of fertilizers on condition of anonymity.

The pact with the Syrian government-owned General Company for Phosphate and Mines (Gecopham) was signed during a visit by fertilizer secretary Sutanu Behuria and other senior officials of the department in the first week of October.

A feasibility study was conducted jointly by Projects and Development India Ltd (PDIL) and RITES at a cost of $1.5 million (Rs.6.7 crore).

As per the terms of the agreement, India will help Gecopham set up a plant with a production capacity of 1 million tonne (mt) of diammonium phosphate (DAP). Officials say India is likely to provide Syria with an initial assistance of Rs.100 crore and technical expertise, though details are still being worked out.

Although the domestic supply of DAP has exceeded demand this year, officials say that increased capacity abroad will help hedge against future shortfalls.

Rock phosphate, the main ingredient required for the production of DAP, will be provided by Syria. According to estimates, Syria has rock phosphate reserves to the tune of 1,800 mt, with an annual production capacity of just 3 mt.

This rock phosphate reserve, the 11th largest in the world, could last Syria at least another 100 years, officials say.

“They want to increase their production to 10 mt and are scouting for investments from foreign countries,” said the official quoted earlier. “They hardly have any agriculture or agro-based industries. So whatever capacities we can help build for them will in effect become our captive capacity.”

India is also looking to establish gas-based urea production capacities in Saudi Arabia and coal-based urea production facilities in Indonesia.

Officials say that the government is in talks with a couple of companies in Saudi Arabia including Saudi Basic Industries Corp. (SABIC). “These talks are at a preliminary stage, but we expect some forward movement soon,” said a second official.

Analysts say that the landed cost of gas in Saudi Arabia comes to about $1.2 per million British thermal unit (mmBtu), as against $6-6.5 per mmBtu in India. “So, although the cost of setting up a urea plant in Saudi Arabia would be the same as in India, the feedstock cost would be a fifth of that in India,” said Tarun Surana, an analyst with Mumbai-based Sunidhi Securities and Finance Ltd.

On Friday, senior ministry officials held an internal meeting on framing the terms of agreement with the Indonesian government.

India is looking to set up a coal-based urea plant in Indonesia. Mint, however, could not ascertain what transpired at the meeting.

Indonesia is the sixth largest producer of coal in the world. Analysts say that although Australian coal is superior in quality, low-ranked Indonesian coal is cheaper and, therefore, increased demand will force India to increasingly switch to Indonesian coal.

“In countries like China, coal gasification is fast becoming the preferred method for urea production.

So Indonesia, with its huge reserves of relatively cheap coal, is an ideal place to set up captive capacities,” Surana added.

India’s annual urea consumption is 27 mt, as against a domestic production of 22 mt. The deficit is made good by imports.

(Source:www.livemint.com)