India exploring JV opportunity to produce urea in Iran

AK Ramdas 14 January 2015

A consortium consisting RCF and other state-owned companies is planning a joint venture with a suitable partner in Iran, so that the entire production of urea-ammonia can be underwritten for supplies, back to India

In the past few months, we have been crying hoarse for India to set up fertilizer plants as joint ventures in some of the Middle Eastern countries, particularly Iran, because of the abundant availability of gas as a feeder stock. Urea plants in Qatar and Sultanate of Oman, which have been supplying urea, have assisted India in meeting its needs, which includes a shortfall of about 8 million tonnes every year.

The announcement by the government that a high-level delegation will visit Iran shortly to explore such a joint venture possibility is to be welcomed whole-heartedly. India’s urea needs are in the region of 29/30 million tonnes, while the domestic production has been around 22 million tonnes, necessitating the import of the balance. It may be recalled that, due to the withdrawal of subsidy for the urea plants, in the South, which depended on naphtha as feed stock, and subsequent reinstatement, there was a public outcry. To overcome the shortage, urea had to be imported. Gas supplies in the country have been erratic due to fall in production, and the coal bed methane supplies have also been unsatisfactory.

In the circumstances, it is gratifying to note that a Consortium consisting of state-owned companies like Rashtriya Chemicals and Fertilizers, Gujarat Narmada Valley Fertilizer Corp and Gujarat State Fertilizer Corp are planning a joint venture with a suitable partner in Iran, so that the entire production of urea-ammonia can be underwritten for supplies, back to India. This, in the long run, would work out cheaper than importing the gas.

The details of the delegation to Iran to discuss the issue have not yet been announced. However, it is safe to assume that this will be probably led by the Fertilizer Ministry and supported by the three Indian partners, mentioned above. It is well known that Iran has also been keen to increase its trade with India. When the discussions show signs of more than one such plant being set up, India should take this opportunity to plan accordingly.

It may be recalled that, in the last 14 years no new fertilizer plants have come up in the country and the government had also made it clear that they have no intention of underwriting the entire production.

Urea has been highly subsidised and at the same time, the government has also not been willing to let the manufacturers decide the marketable price.

In any case, the government has been working on a national fertilizer policy, but so far, this has not been announced. Gas production continues to be erratic and it will take a few years more before the recently discovered gas reserves can be commercially tapped and supplied. Imports will have to continue and such a joint venture, in Iran, to produce urea and supply to India, should be welcomed.

Time is of essence, and efforts ought to be made to ensure expeditious moves to set up the plant and make it operational. It is hoped that the Indian delegation can be sent well in time before the Iranian Nav Roz (New Year) which is a couple of months from now!

(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)

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