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RIL plans to build the biggest greenfield fertiliser capacity in the country

Tuesday, July 24, 2007

RIL is planning to build the biggest greenfield fertiliser capacity in the country. The company has submitted proposal to the fertiliser ministry to set up a manufacturing plant of global scale (up to 4 million tonne). RIL has proposed to use some of the Krishna-Godavari gas as feedstock bought at market prices. RIL has been facing a huge backlash from fertiliser and power companies over the gas price it is offering them. Now, plans are afoot to take up the challenge by becoming a player itself.

RIL recently invited bids from fertiliser and power companies for gas from its KG find. It has argued that subsidies in the fertiliser sector can be brought down by almost Rs 4,000 crore if fertiliser companies anually switched to natural gas from naphtha. The delivered price for KG gas is expected to be marginally above per Million British Thermal Units (mmbtu).

Confirming the development, a senior RIL official said that the proposed plant would play on the economies of scale to build a world-class facility. “We are confident that we can build the plant 30-40% lower costs,” he said. RIL, which is carrying out a feasibility study, has asked the fertiliser ministry to provide some clarifications on the upcoming fertiliser policy and the pricing structure.

“We are given to understand that fertiliser companies would be allowed to sell the products at import parity prices. In other words, pricing controls on fertilisers may be removed. Instead, fertiliser subsidies for the farm sector will be given directly to farmers and not to fertiliser companies,” he said.

The government is reviewing the pricing policy which should throw some light on the future pricing trends for fertilisers. India is currently facing a huge shortage in fertilisers, importing nearly 5 million tonnes every year.

India had made moves to set up fertiliser capacities in gas-producing countries like Oman to take advantage of fuel availability there. Now, with abundant gas reserves in the KG basin, RIL would have an edge over others with large reserves at its disposal. RIL has also sought clarifications from the government on the tax sops that would be available for companies seeking to invest in the fertiliser sector.

According to the fertiliser ministry, the total installed production capacity for fertilisers in 2003 was 121.10 lakh MT of nitrogen (inclusive of an installed capacity of 208.42 lakh MT of urea after reassessment of capacity) and 53.60 lakh MT of phosphatic nutrient, making India the third-largest fertiliser producer in the world.

There are 57 large fertiliser plants in the country, manufacturing a range of nitrogenous, phosphatic and complex fertilisers. Out of these, 29 produce urea, 20 produce DAP and complex fertilisers, 7 produce low analysis straight nitrogenous fertilisers and 9 manufacture ammonium sulphate as a by-product.

Posted by FR at 10:01 PM  

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