Amid shortages in di-ammonium phosphate (DAP) and a normal lack of producing sector investments, one business – urea – has truly seen vital set up of latest manufacturing capacities and progress in direction of reaching the Narendra Modi authorities’s purpose of atmanirbharta (self-reliance).
Between 2011-12 and 2023-24 (April-March), India’s home urea manufacturing has risen from 22 million to 31.4 million tonnes (mt), even with imports falling from 7.8 mt to 7 mt after peaking at over 9.8 mt in 2020-21. The present fiscal has up to now recorded an additional 31.7% drop in imports (desk 1), which may even up at beneath 5 mt – the bottom for the reason that 4.7 mt of 2006-07.
Greenfield tasks
The above output enhance has come primarily courtesy of six new crops: Three of Hindustan Urvarak & Rasayan Ltd (HURL) and the remainder of Chambal Fertilisers & Chemical substances, Matix Fertilisers & Chemical substances and Ramagundam Fertilizers & Chemical substances Ltd (RFCL).
The six crops – the Chambal, RFCL and Matix tasks entailed an funding of Rs 6,000-7,000 crore every, whereas Rs 8,100-8,600 crore for the HURL models constructed largely through the post-Covid interval – collectively produced 7.55 mt of urea in 2023-24 (desk 2).
These greenfield crops run on pure fuel (largely imported) with an an identical annual manufacturing capability of 1.27 mt. Three of them – Matix, Chambal and HURL-Gorakhpur – produced past their rated capacities in 2023-24. They’re additionally comparatively energy-efficient, requiring solely about 5 giga-calories (GCal) to provide one tonne of urea, versus the sooner models that devour between 5.5 and 6.5 GCal.
Furthermore, the brand new crops are situated within the “new Inexperienced Revolution” areas of jap Uttar Pradesh, West Bengal, Bihar, Jharkhand and Telangana, as in opposition to the older models such because the Nationwide Fertilizers Ltd’s (NFL) Bathinda, Nangal and Panipat catering to farmers in Punjab and Haryana.
“We have now a 20% market share in Jap India. In addition to being the only urea producer in West Bengal, we additionally provide to Bihar, Jharkhand, Odisha, Assam and Tripura,” stated Nishant Kanodia, chairman of Matix Fertilisers. The corporate’s plant at Panagarh, close to Durgapur, produced 1.5 mt at 118% capability utilisation and consumed 4.856 GCal/tonne in 2023-24, making it the nation’s largest single-unit and most energy-efficient urea producer.
As well as, there’s a seventh 1.27-mt urea plant developing in Talcher (Angul district, Odisha) at an estimated value of Rs 17,080.69 crore. Not like the six gas-based models producing ammonia with know-how licensed from KBR (US) or Haldor Topsoe (Denmark) and urea from Saipem (Italy) or Toyo Engineering (Japan), Talcher Fertilizers Ltd’s undertaking, which is about two-thirds accomplished, will use coal because the feedstock.
“The coal is from the Talcher mines. Given its excessive ash content material, there may be provision for mixing it as much as 25% with petroleum coke sourced from Indian Oil Company’s Paradip refinery. The federal government is pushing this undertaking, because the feedstock is considerably indigenous (pet-coke is a byproduct of home refineries, although they course of imported crude oil) and based mostly on a first-of-its-kind know-how in India (coal gasification),” an business supply instructed The Indian Specific.
The lump sum turnkey contract for the Talcher plant’s coal gasification and ammonia-urea packages has been awarded to Wuhuan Engineering Firm Ltd of China.
Make versus Purchase
A fundamental query with regard to the brand new crops is whether or not the funding – totalling some Rs 61,575 crore, inclusive of Talcher – is price it.
The landed value of imported urea in India, based mostly on NFL’s final tender, is presently $370-403 per tonne. However, pure fuel is being delivered to home urea crops at a median uniform “pooled” value of $14.35 per mmBtu (million metric British thermal models) by way of gross calorific worth, which is $15.9 (1.108 occasions) on a internet calorific worth foundation.
Taking an power consumption of 5 GCal/tonne and 0.25 GCal for each one mmBtu, the feedstock value alone within the urea manufactured by the brand new crops involves $318 per tonne at $15.9/mmBtu. Including a $175 fastened value – which greenfield tasks are entitled to for a interval of eight years (supposedly to cowl all different fees, together with curiosity, depreciation, overheads and earnings) – takes the entire to $493 per tonne. It’s, thus, cheaper right this moment to “purchase” (import) than “make” (produce) urea at dwelling.
However the counter to this argument is that the $15.9/mmBtu delivered value of fuel is just round $12.62 after excluding customs obligation and different taxes, including as much as 26%. Netting out these levies would convey down the feedstock value in home urea to $252 and the entire to $427 per tonne.
Additionally, the imported bulk urea arriving in vessels needs to be discharged on the port, earlier than bagging and reloading for dispatch to the consumption centres. Transferring this urea to the northern and jap hinterlands – that are farther away from the ports than from the place the brand new crops are situated – would contain a further value of $30-35/tonne in direction of stevedoring, bagging, differential transport and curiosity bills. That additional narrows the hole between “purchase” and “make”.
On prime of those are the advantages of making employment and boosting general financial exercise that accrues from Make-in-India, as in comparison with merely Import-into-India.
How a lot to make
With seven terminals for dealing with imported liquefied pure fuel (LNG) and pipelines crisscrossing a lot of the nation, the economics of make-versus-buy urea has undergone a change within the final decade.
The LNG terminals – at Mundra, Dahej and Hazira (Gujarat), Dabhol (Maharashtra), Kochi (Kerala), Ennore (Tamil Nadu) and Dhamra (Odisha) – and pipelines community have made it simpler to import and transport fuel, as an alternative of urea, to the hinterland. Import of urea now makes extra sense for feeding the western and southern markets nearer to the ports.
It, then, permits for a distinct atmanirbhar urea technique of “making” extra in Northern and Jap India, whereas exploring higher “purchase” choices for Peninsular India. This could possibly be mixed with shutting down a number of the older energy-inefficient crops and in addition curbing urea consumption.
Between 2011-12 and 2023-24, India’s consumption of urea has gone up from 29.6 mt to 35.8 mt, whereas not a lot for DAP (10.2 mt to 10.8 mt) and sophisticated fertilisers (10.4 mt to 11.1 mt). The unbalanced consumption development has been pushed by farmgate costs of urea being frozen at Rs 5,360 per tonne (with out neem-coating) since November 2012.
A extra rational pricing would promote the considered software of urea by farmers and, in flip, cut back the unsustainable strain on each “making” and “shopping for” this nitrogenous fertiliser.
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