Nagarjuna Fertilisers draws up Rs 10,000 crore revival plan for Fertilizer Corp unit

Nagarjuna Fertilizers and Chemicals Ltd (NFCL) has submitted a proposal to the Union government seeking permission to revive the ailing fertilizer facility of Fertilizer Corp. of India Ltd (FCIL) in Andhra Pradesh, involving an investment of up to Rs 10,000 crore in two phases. FCIL’s facility is located at Ramagundam in Karimnagar district, about 240km from the state capital. The unit, built at a cost of around Rs217 crore, began operations in November 1980 and was closed in April 1999 due to non-availability of sufficient budgetary support from the government of India.

The company has submitted a revival proposal to the Union ministry of fertilizers involving around Rs 5,000 crore of investment in the first phase and another Rs 5,000 crore in the second phase. The revival proposal almost amounts to setting up a greenfield project, since the existing plant and machinery at the Ramagundam unit are obsolete, but the rest of the physical assets can be used with some modifications.

Further Mr. Singh said NFCL plans to set up a capacity of 1.25 million tonnes a year in the first phase, using natural gas as feedstock and in the second phase at Ramagundam with 1.25 million tonnes capacity using coal gasification, taking advantage of the coal reserves in the area. Currently the NFCL is in talks with an Australian company for acquiring the necessary technology in this regard.

The gas pipeline of Reliance Industries is very close to the Ramagundam facility. It will also have the advantage of the Godavari river for water supply. NFCL is currently the only company in south India producing urea. There are around 32 fertilizer companies, both public and private, in the country producing urea. The urea production units of fertilizer companies in the southern part of the country, such as Southern Petrochemical Industries Corp. Ltd and Fertilizers and Chemicals Travancore Ltd, were closed, mostly owing to viability issues on account of high cost of the main fuel, naphtha.

While India has a urea production capacity of around 20 million tonnes, demand surpassed 26 million tonnes last year owing to good monsoons and high demand for fertilizers, forcing the country to import urea. Imports of urea increased from 4.72 million tonnes during 2006-07 to 6.93 million tonnes during 2007-08, according to the latest annual report of the Fertilizer Association of India. The gap between demand and production in the country is expected to grow to at least 10 million tonnes by 2011-12.