Eyes sick units; will tap own LNG fuel supply
The Adani Group, with revenues of $11.5 billion and interests in multiple sectors including logistics and energy, is planning a major foray into the fertiliser sector in a move that could help the country cut its expensive imports of urea.
The Ahmedabad-based group, sources said, is carrying out due diligence of at least three defunct urea manufacturing units, including Sindri in Jharkhand, an official privy to the development told FE. Gautam Adani, executive chairman of the group, would shortly review the process and take the final call on whether to acquire these units, these sources added.
The group’s two liquefied natural gas (LNG) terminals to come up on the east and west coasts and the massive pipeline infrastructure being created in the public sector are expected to come handy for the group in its fertiliser manufacturing enterprise. Although the price of urea is still controlled by the government, it is expected that sooner rather than later this key fertiliser would be decontrolled and the subsidy would be transferred to the eligible farmers directly, unburdening the industry in the process.
When contacted, an Adani spokesperson said, “We do not comment on market speculation.”
The group had announced plans to set up two LNG terminals at Dhamra, in Bhadrak district of Odisha, and Mundra in Gujarat. The Mundra terminal, to be set up with Gujarat State Petroleum Corporation (GSPC) at a cost of R4,500 crore, is expected to be ready by December 2016.
The company itself has gas supplies along both the east and west coasts, which would make it feasible to feed fertiliser plants in multiple states. Additionally, construction of the first phase of the Jagdishpur-Haldia pipeline by the public-sector Gail (India) began recently. This gas network will support major industries in the area, especially fertiliser units such as Barauni and Sindri plants.
Currently, there are a few sick fertiliser units in the country. These include Fertilizer Corporation of India’s (FCI) closed plants at Talcher (Odisha), Ramagundam (Telangana), Gorakhpur (Uttar Pradesh), and Sindri, and Hindustan Fertilizer Corporation’s Barauni unit in Bihar. Madras Fertilizers too was declared sick in 2009. The government is trying to revive the sick units by roping in private players.
Adani officials have already visited the Sindri plant. The ministry of chemicals and fertilisers plans to soon call bids to revive the Rs 5,500-crore urea manufacturing plant. The plant operated by 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) recommended its closure.
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.