India's Oswal Chemicals & Fertilisers to Develop Integrated Urea, Diammonium Phosphate and Power Complex in Andhra Pradesh

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Researched by Industrial Info Resources (Sugar Land, Texas)--Indian fertilizer company Oswal Chemicals and Fertilisers Limited (BSE:500063) (OCFL) (New Delhi) has announced a proposal to develop an integrated fertilizer and power complex in Andhra Pradesh. The almost $1.6 billion project is expected to help meet the increasing demand for fertilizers in Andhra Pradesh. The company has already identified land for the project in Telangana and coastal Andhra Pradesh, although the project is likely to be a coastal one.

According to the project proposal, OCFL will invest $1.1 billion to set up a 1.2 million-ton-per-year urea plant and $445 million to set up a 1 million-ton-per-year diammonium phosphate (DAP) plant and a 100-megawatt (MW) power plant. The urea plant will be based on natural gas, allocation for which has been requested by OCFL. The company's application for gas allocation to the Ministry of Chemicals and Fertilizers has already been forwarded to the Ministry of Petroleum and Natural Gas. Phosphoric acid required to manufacture urea will be imported from Syria.

Surplus ammonia from the urea plant will be used to meet the ammonia requirement of the DAP plant. The power plant will primarily use steam released by the urea production unit and coal, which will be imported from OCFL Indonesian coal mines. The company's Indonesian coal mines have more than 100 million tons of coal reserves.

State Chief Minister K. Rosaiah, who has been presented with the proposal, has assured Managing Director Abhay Oswal of early clearances. The project is expected to obtain all of the necessary approvals with ease, given the high dependence of the state economy on agriculture. Recent years have seen record cultivation levels and to maintain that growth, the state will need to encourage the fertilizer and farming sectors effectively.

The urea and DAP projects are expected to create employment opportunities for 5,000 and 3,000 people, respectively, during the construction phase, and for about 1,000 and 700 skilled and unskilled persons, respectively, during normal operations.

The Oswal Group currently operates a 1 million-ton-per-year ammonia urea facility at Shajahanpur in Uttar Pradesh. The company also operates the world's single largest DAP facility--a 2 million-ton-per-year DAP plant at Paradip in Orissa. The group recently set up a 760,000-ton-per-year gas-based ammonia plant in Western Australia.

Chief Minister Rosaiah said that Andhra Pradesh expects to achieve its highest production of food grains during the current financial year (2010-11), with a production of 21 million tons. He said that the sowing of all the major crops this year is higher than last year's target for the autumn harvest. Farmers have sown 19 million acres of agricultural land, 21% more than the expected 16.3 million acres. A natural consequence is a high demand for fertilizers. Rosiah said that of the 3.63 million tons of fertilizers intended for supply to farmers in the state, about 3.1 million tons have already been supplied.

India is the second largest consumer of fertilizers worldwide and produces about 20 million tons per year of urea. This meets about 76% of the nation's demand, leaving 24% to be imported. According to analyst Swarnendu Bhushan of HDFC Securities Limited (Mumbai), "While urea demand is set to rise to 28.8 million tons in fiscal 2012, capacity expansion through debottlenecking, brownfield/greenfield expansions/revival of closed units is likely to rise only to 23.3 million tons. This will cause a deficit of 5.4 million tons of urea."

A senior official in the fertilizer industry said that India's consumption of fertilizers in 2010-11 is expected to reach 56 million tons, an increase of about 6% over the 53 million tons consumed in 2009-10.

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