With land and fuel issues sorted, bids to revive Sindri urea plant soon

By: | Updated: July 8, 2015 10:41 AM

With issues related to land and fuel sorted out, the ministry of chemicals and fertilisers is set to call bids to revive the urea manufacturing plant at Sindri in Jharkhand.

Urea plantAt present, India consumes nearly 30.5 million tonnes of urea every year. (Reuters)

With issues related to land and fuel sorted out, the ministry of chemicals and fertilisers is set to call bids to revive the urea manufacturing plant at Sindri in Jharkhand. The plant operated by Fertiliser Corporation of India (FCI) was set up in 1959, but has been shut down since 2002 after it turned sick and the Board for Industrial and Financial Reconstruction (BIFR) subsequently recommended its closure.

The cost of the urea unit revival is estimated at close to R5,500 crore.

According to officials in the fertiliser ministry, currently the government is working towards finalisation of the technical bids, which are likely to be unveiled in the next two months. “The bidding norms would ensure that the project is viable. The plan is to have a new urea manufacturing facility to start with, but later steel and power plants could be added to the project,” an official privy to the development told FE.

Privately-held companies like the Adani Group and Deepak Fertilisers and Petrochemicals, cooperatives like Kribhco and the government-owned Rashtriya Chemicals and Fertilizers (RCF) have shown interest to revive the Sindri unit, the official added.

The Centre has prevailed on the state government to make available about 600 acres of land for the urea project. Earlier, PSU steel maker SAIL opted out of the plan because the state could not offer encroachment-free land in Sindri. SAIL had proposed to set up a new 1.15 million tonnes per annum (mtpa) fertiliser plant, a new steel mill of 5.6 mtpa capacity and a 1,000 MW power plant with an investment of Rs 35,000 crore.

At a recent meeting between officials of the fertiliser ministry and GAIL (India), it was mutually agreed that the PSU gas marketing and trading company would expeditiously implement the Jagdishpur-Haldia pipeline project. The site at Sindri is nearly 60 km from this pipeline and would be connected through a spur line for fuel.

“The fertiliser ministry is now confident that after ensuring both land and fuel, Sindri project would attract several bidders,” the official explained.

However, industry officials are wary about price of gas that would be supplied to the urea plant. At the current domestic price of natural gas at $5.18 per million British thermal units, a tonne of urea costs about $310. Due to scarcity of indigenously produced natural gas, GAIL would supply imported fuel through its Jagdishpur-Haldia pipeline, which could cost anything $8-10 per mBtu.

“The cost of production of urea would shot up to $500 per tonne if imported gas is used. This would either make imports (of urea) cheaper or government would have to shell out much more for subsidising the fertiliser. Urea production at home using expensive imported gas is viable only if the international price for the fertiliser shots up exponentially,” said an official with a fertiliser firm.

At present, India consumes nearly 30.5 million tonnes of urea every year. Of this, domestic production hovers at 22.5 million tonnes, while the remaining 8 million tonnes are imported. Currently, urea production cost is in the range of Rs 14,000-20,000 per tonne depending on the feed, while market price is around Rs 5,310-5,360 per tonne. The difference is being subsidised by government.

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