The Indian economy may be going through an extended investment slump, but one industry — urea — is witnessing frenetic activity, with new plants that have just got commissioned or are about to within the next 2-4 years.
On January 1, Chambal Fertilisers and Chemicals Ltd kicked off commercial production at its fresh 1.34 million tonnes per annum (mtpa) capacity facility at Gadepan in Rajasthan, costing $ 903 million (Rs 6,035 crore).
However, this is just the start.
By the end of 2019, there will be a second 1.27 mtpa plant coming up at Ramagundam in Telangana. This is one of the five closed units of the Fertiliser Corporation of India Ltd (FCIL) and Hindustan Fertiliser Corporation Ltd (HFCL), which are being revived through greenfield investments involving newly-created public sector joint ventures (JV). Ramagundam Fertilisers and Chemicals Ltd is a JV of National Fertilisers Ltd (NFL), Engineers India Ltd and FCIL.
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Three other such plants of 1.27 mtpa each — at Gorakhpur (Uttar Pradesh), Sindri (Jharkhand) and Barauni (Bihar) — are being set up by Hindustan Urvarak & Rasayan Ltd, a JV of Coal India Ltd, NTPC Ltd, Indian Oil Corporation, HFCL and FCIL. “The lump-sum turnkey contracts for their execution have already been awarded — to Japan’s Toyo Engineering Corporation for Gorakhpur and to a consortium of the London-based TechnipFMC and L&T Hydrocarbon Engineering for the other two projects. Onsite work, too, is in full swing. We expect Gorakhpur’s commissioning by February 2021, and both Sindri and Barauni in May 2021,” a senior government official said.
All these are state-of-the-art plants running on natural gas, which is first ‘reformed’ to produce hydrogen for conversion into ammonia by combining with nitrogen from the atmosphere. The ammonia is, then, further processed into urea. The process licensors in the Gadepan and Gorakhpur projects are KBR Inc, US (formerly Kellogg Brown & Root) and Toyo Engineering for the ammonia and urea lines, respectively. For Ramagundam, Sindri and Barauni, the technology suppliers are Denmark’s Haldor Topsoe (ammonia) and Italy’s Saipem (urea).
In addition to the above five, there are two other plants, also of 1.27 mtpa capacity each.
The first one, at Panagarh near Durgapur in West Bengal and promoted by Matix Fertilisers & Chemicals Ltd, was originally supposed to run on coal-bed methane based on KBR-Saipem technology. It actually began production on October 1, 2017, but the non-availability of feedstock led to suspension of operations from November 15, 2017 and Matix even being dragged to the National Company Law Tribunal after defaulting on loans. The unit’s resumption hinges upon natural gas availability from the 2,655-km pipeline from Jagdishpur (UP) to Dhamra (Odisha). This pipeline, being built by GAIL (India) Ltd, has already reached Barauni, while the spurlines to Gorakhpur, Sindri and Durgapur are scheduled for completion by December 2019.
The second plant at Talcher (Odisha) is yet another revival project. Being executed by Talcher Fertilisers Ltd — a JV of GAIL, Coal India, Rashtriya Chemicals & Fertilisers (RCF) and FCIL — it is envisaged to be a coal gasification-based ammonia-urea complex.
“The plant will use coal from the Talcher mines. Since this coal has high ash content, it will be blended up to 25% with petroleum coke sourced from Indian Oil’s Paradip refinery. The urea to be produced would be costlier than from imported liquefied natural gas (LNG), but the government wants to go ahead, as it is being fired by feedstock that is substantially indigenous (pet-coke is byproduct of domestic refineries that process imported crude). We are going to soon award the lump-sum turnkey contract and the targeted commissioning is by September 2023,” added the earlier-quoted official.
Put together, all the seven plants add up to 8.96 mtpa, which is nearly 40% of the country’s total urea production capacity of 23.5 mtpa till September 2017, before the now-idle Matix Fertilisers facility came on steam. The projected aggregate outlay: Rs 51,000 crore (see table 1).
A boom in urea investment of this scale was last seen during the 1980s, when the overall manufacturing capacity virtually doubled from about 7.5 mtpa to 14.70 mtpa. A host of new plants — Gujarat Narmada Valley Fertilisers & Chemicals’ Bharuch and Krishak Bharati Cooperative’s Hazira (Gujarat), RCF’s Trombay-V and Thal (Maharashtra), NFL’s Vijaipur (Madhya Pradesh), Indian Farmers Fertiliser Cooperative’s Phulpur and Aonla (UP), Indo Gulf Fertilisers’ Jagdishpur (UP) and Brahmaputra Valley Fertiliser Corporation’s Namrup-III (Assam) units — sprung up. All of them – barring Bharuch, Thal and Phulpur — operated on indigenous natural gas, mainly supplied through the Hazira-Vijaipur-Jagdishpur pipeline. And they (with the exception of Namrup-III) deployed the Haldor Topsoe process for ammonia and Snamprogetti (which is now Saipem) technology in urea manufacturing.
In the 1990s, a few more capacities — including Chambal Fertilisers’ Gadepan I and II, Iffco’s Phulpur II and Aonla II, Nagarjuna Fertilisers & Chemicals’ Kakinada I and II (Andhra Pradesh), NFL’s Vijaipur II, Kribhco’s Shahjahanpur (UP) and Tata Chemicals’ Babrala (UP) — were established, taking the total to 20 mtpa by the decade’s end. In the subsequent decade and a half, hardly another 3.5 mtpa got added.
The current revival, unlike the 1980s boom, is based largely on use of imported re-gasified LNG feedstock, conveyed via newly laid pipeline systems such as Jagdishpur-Haldia and Bokaro-Dhamra (for Gorakhpur, Barauni, Sindri and Panagarh) and Mallavaram-Bhopal-Bhilwara-Vijaipur (for Ramagundam). The LNG would be mostly imported into the eastern coast Dhamra and Kakinada ports, where independent re-gasification terminals are being developed.
India now produces roughly 24 mtpa of urea (many plants operate above their rated capacities) and imports 7-8 mtpa (table 2). If all the proposed new capacities materialise, imports may reduce to nothing.
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