State-run Coal India is likely to walk out of a joint venture (JV) for a fertiliser plant in Odisha, putting a question mark on the government’s ambitious Rs 8,000-crore programme to revive the Talcher unit of the Fertiliser Corporation of India (FCIL) with investments from cash-rich PSUs.
Sources in the government said CIL, which was to hold 35% and 40% in two JV companies proposed under FCI’s Talcher unit, has expressed its inability to participate in the initiative saying the company’s memorandum of association (MoA) barred it from making investments in the fertiliser business.
?We have asked the coal secretary to look into the issue and get a CIL board approval to modify its MoA and fast-track investment proposals for the fertiliser plant. But, as of now, the plan has come to a grinding halt,? said an official in the fertiliser ministry with direct knowledge of the development.
While CIL officials remained unavailable for comment, sources in the company said that fertiliser manufacturing was not core to company’s expansion plans, especially at a time when it needs to pump money to increase coal production. ?But a directive from the government cannot be ignored,? sources said.
As per the R8,000-crore revival plan, a consortium of four state-run companies ? Coal India (CIL), GAIL India, Rashtriya Chemicals and Fertilizers (RCF) and FCIL ? was to make investments via two JV entities.
The first JV was proposed between GAIL, CIL, and RCF with GAIL holding 50% while CIL’s share was to be 35%. RCF was to hold 15% in the proposed JV, which would act as upstream coal gasification and gas-purification unit.
Under the second JV, a downstream urea and ammonium nitrate plant was proposed be set up. CIL and RCF were each to hold 40% while the balance would be with FCIL. The project was expected to be commissioned by 2017.
?If CIL fails to join the JVs, it would be very difficult for the government to mobilise resources from other PSUs,? said the fertiliser ministry official quoted earlier. By virtue of CIL?s share in the projects, the company would have been instrumental in mobilising close to R3,500 crore for the JVs.
FCIL’s fertiliser unit in Odisha was closed 15 years ago after incurring heavy losses. The revival plan was worked out by the chemical and fertiliser ministry under Srikant Jena, a local member of Parliament. The plan, with potential to generate direct and indirect employment for about 25,000, was also considered an electoral masterstoke ahead of the general elections.
The revival project for the Talcher unit was being set up on coal gasification for production of 1.2 million tonne per annum (mtpa) of urea and ammonium nitrate. CIL was to supply 5 mtpa coal for this project. The ammonia-urea project depends on ammonia synthesis gas from the coal gasification plant.
The Talcher unit started production in 1980 and used to produce 600-700 metric tonne of urea. But, during the 1990s, the plant started incurring heavy losses, and the accumulated losses are estimated to be nearly R1,000 crore, which resulted in its shutdown in April 1999 when the BJP-led NDA was in power at the Centre.
The revival of the closed fertiliser unit was expected to bridge the gap and reduce the country’s dependence on imports. India produces about 22 mt of urea and imports around 8 mt to meet the shortfall.
Industry experts believe that since there are no fertilizer units in Bihar, Jharkhand, Chhattisgarh, Orissa and West Bengal, revival of the closed unit will ensure fertiliser availability for the consumption centres, contributing to agricultural development in these areas.