Rashtriya Chemicals & Fertilizers Limited (RCF) is eyeing joint ventures in Iran and Ghana to produce cheaper urea. Gas prices in the two countries are cheaper than India ($4.2/mmBtu at present and set to double once a new formula is applied in India). While Iran is believed to have offered natural gas at around $3/mmBtu, RCF is awaiting the gas price quotation from Ghana.
?We are fine with gas price that Iran is offering. But other logistics like land and infrastructure costs would have to be factored in. There would be more clarity on the issue after the US sanctions (on Iran) are lifted,? RCF chairman & managing director RG Rajan told FE.
?Ghana has recently discovered rich reserves of gas that is why we intend to set up a urea plant there and have sought long-term gas supply agreement,? Rajan added.
RCF is not the only fertiliser company looking at overseas destinations for setting up urea manufacturing units. India?s largest fertiliser cooperative, Iffco, last week finalised plans to set up a $1.2-billion fertiliser plant at Becancour in Quebec, Canada. Iffco managing director US Awasthy said the 1.3-1.6-mt capacity urea plant is likely to be commissioned by 2017.
RCF, however, rules out setting up a urea plant in near future in India due to higher gas prices. According to Fertiliser sssociation of India, the domestic cost of production for urea at the current gas price of $4.2/mmbtu averages at $265-270/tonne. ?After the gas price is doubled, it will be around $320-340/tonne.? The current cost of urea imports from West Asia and central Asia average $300-320/tonne.
India imports around 8 million tonne urea a year. The present domestic urea production is about 22 million tonne and the consumption is pegged at 30 million tonne. The limited availability of domestic gas has led urea players to depend on expensive imported gas for production.
Urea is the only fertiliser that is still under control and sold at a government-notified price. The price of urea, the most widely used fertiliser, is highly subsidised and fixed by the government. The last major price revision was on April 1, 2010, when the price was increased to Rs 5,310 per tonne from Rs 4,830 per tonne. In October 2012, the price was marginally hiked by Rs 50 to Rs 5,360 a tonne. Attempts to increase urea prices in the recent past have not been successful due to lack of political consensus.