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Materialisation of New Projects will Depend Largely on Government Policies
RCF is on a major expansion spree and targets to grow manifolds five years down the line, says R G Rajan, Chairman & Managing Director RCF in an exclusive interview with Mittravinda Ranjan. He talks about the plant expansions undertaken at Thal, coal gasification based plant in the pipeline and business plans for organic and inorganic growth of the fertilizer giant.

Fertiliser sector is expected to see investments close to USD 10 billion in India. May we have your comment?
Investments in the fertiliser sector are an imperative for a country of our size and growing rate. Currently the country requires approximately 6-7 million tonnes of additional urea to meet the demand supply gap. Fertiliser manufacturers including Rashtriya Chemical Fertilizers (RCF) plan to set up Greenfield capacities or undertake Brownfield expansions. However these may take some time to materialise as the industry is waiting for a slew of suitable policies to be announced for investments, gas allocation and gas pricing.
Indian government has already set up a committee of secretaries to look into this issue and the new policies are likely to be announced in the next couple of months. Industry hopes that these would be attractive enough to execute and implement the planned projects. An import parity price based policy was announced in 2008 by the Government but expected projects could not materialise. Industry now hopes that the government will factor some relationship between gas price and floor policy of urea.

Which are the current major projects of RCF?
We are revamping the Thal ammonia and urea plants and expanding the urea capacity from 1.7mtpa to around 2 mtpa. Overall cost of the project is approximately `488 crore funded entirely by RCF and this project is in the advanced stage, targeted to be commissioned during the financial year 2011-12. It will be completed in two phases, Ammonia-I will be commissioned in June 2011 and the second train of Ammonia with expanded capacity in December 2011.
Besides we plan to set up Thal- III expansion project with an output of 2000 tonnes per day ammonia and 1.15 mtpa urea capacities. This would require investment of the order of
4000 crore. The project is gas based and will be executed on the EPC / LSTK basis. The bids have already been invited and four consortiums of global players have shown interest. The offers will be submitted by 31st March 2011. Project evaluation and preparation of detailed feasibility report (DFR) would take another six months followed by around same period for statutory approvals. We target to complete the project in around 36 months from zero date of 1st April 2012.

Tell us about the coal based production facility RCF plans to set up in the near future.
We are planning to set up India’s first coal based ammonia urea plants at Talcher in Orissa. This is a joint venture project of RCF, GAIL and CIL and we are in the process of working out the financials for the JV. Besides 1.15 mtpa urea production, the unit will produce nitric acid and ammonium nitrate. The project will be set up at approx. cost of 7000- 8000 crore. With Coal India as one of the JV partners, we have already assured coal supply for the project. CIL will supply 5.5 mtpa of coal to the JV project at Talcher. In the future as well we do not see any challenge in terms of procurement of feedstock for this project.
We also plan to set up downstream capacities to produce value added products and are currently in talks with various manufacturers who have evinced interest. The coal gasification project to produce syn-gas for ammonia synthesis will be on Build, Own and Operate (BOO) basis. Whereas, the downstream ammonia, urea, nitric acid and ammonium nitrate plants shall be installed by our JV on LSTK / EPC basis. DFR will be ready by March 2012 based on which decision will be made about the project investment.

What about international projects of RCF?
We are examining the possibility of setting up two ammonia urea production facilities overseas. A coal based facility in Indonesia and natural gas based unit in Ghana. The project in Indonesia is at very preliminary stage and the MoU was signed during the visit of their Prime Minister to India this January. This is an important project for RCF, however there is time for its implementation as feasibility studies and discussions are likely to take a year’s time before the project is commenced. The second project in Ghana is based on natural gas and the two Governments have signed the MoU. Indian team has already visited Ghana in January this year and the team from Ghana is visiting India by the end of this month to finalise the location and work on the other necessary details for the project. The production is mainly for the Indian market which may be economically viable if natural gas becomes available at attractive price.

How is RCF moving ahead in expansions in the field of phosphatic fertilisers?
We produce phosphoric acid from rock phosphate at our complex for NPK fertilisers. The demand of all nutrient based fertilizers has increased significantly in the country. In 2011-12 the targeted DAP production will be around 4.5 mt and spurred by demand imports are expected to be around 9.0 mt. Due to increasing demand of these fertilisers, there has been a surge in the price of raw material prices in the global market and we are looking at Saudi Arabia for joint ventures as they have significant natural reserves of phosphate. But there are no acquisitions in the pipeline.

What kind of growth does RCF aim to achieve five years from now?
We are moving in a pragmatic manner towards increasing our capacities in an optimum manner, which is our priority. RCF already is expanding capacities in India by debottlenecking of Thal plants. With commissioning of these de-bottlenecking projects and with the two international projects in the pipeline, we are ramping up the ammonia -urea production capacity. Urea production stands presently at 2.0 mtpa and will increase two and a half times in the next five years. With all these projects going online and more focus on marketing of imported fertilisers and expansion in industrial chemicals, we are envisaging a very significant increase in our turnover.