Page 123 - CW E-Magazine (7-5-2024)

Point of View

Urea imports are falling, but self-suffi ciency is a

long way off

The Indian chemical industry has traditionally been a net importer, but over the last decade or so the trade deficit in the industry has
widened significantly, as much of the incremental demand has been met with imports. In FY23 – the last year for which detailed data is
available – the trade deficit was of the order of $29-bn, dominated by imports of a range of organic chemicals as well as inorganic raw
materials, such as ammonia, and phosphoric acid to feed fertiliser manufacturing units. On top of this there are substantial imports of
fertilisers, including urea – the single largest nutrient consumed in the country – as well as phosphatic and potassic ones.

All together chemical imports are only behind imports of gold, crude oil & petroleum products, and electronics, and the vulnerability
in some critical areas – such as pharmaceutical raw materials and urea, for instance– has been a matter of concern.

Recent ammonia/urea projects
In the last 4-5 years, several efforts have been taken to augment domestic production of urea and make up for long-shuttered capa-
cities at two public sector undertakings (PSUs): Fertiliser Corporation of India Ltd. (FCIL) and Hindustan Fertiliser Corporation Ltd. (HFCL).
A handful of joint ventures (JVs) between these two entities and other PSUs have been formed, and there has been liberal injection of
funds to revive manufacturing at them.
The new player in the industry is Hindustan Urvarak & Rasayan Ltd. (HURL), which was constituted as a JV of National Thermal
Power Corporation Ltd (NTPC), Indian Oil Corporation Ltd. (IOC), Coal India Ltd. (CIL) – each with a 29.67% stake – and FCIL (11% stake),
in June 2016. This company has set up gas-based ammonia/urea plants at Gorakhpur (Uttar Pradesh), Sindhri (Jharkhand) and Barauni
(Bihar), using natural gas as feedstock. While the Gorakhpur unit began commercial operations in December 2021, the Barauni and
the Sindri units did so only in April 2023. When running flat out – as most urea plants are expected to do – each will augment India’s
indigenous urea output by 1.27-mt annually – adding up to a significant 3.81-mt of additional urea production.
The revival of Talcher (Odisha) unit of FCIL has been entrusted to another JV, Talcher Fertilizers Ltd. (TFL), with equity stakes by
three PSUs, viz. Rashtriya Chemicals and Fertilizers (RCF), GAIL (India) Ltd. (GAIL) & CIL. FCIL has an equity of 4.45% in the JV, in lieu
of land use and infrastructure provided, and the balance is distributed evenly between the three PSUs. But this is a more technologically
challenging project, based on coal gasification technology, for which little or no expertise and experience is available in the country. TFL
has selected Chinese coal gasification technology for the project, which is not surprising considering companies there have the most
experience, and construction of the plant is ongoing though delayed due to Covid-related restrictions.
The Ramagundam unit of FCIL has been revived as Ramagundam Fertilizers & Chemicals Ltd. (RFCL), in which Engineers India Ltd.
(EIL), National Fertilisers Ltd. (NFL) – each have 26% stake – and FCIL (11%). The 1.27-mtpa urea plant, based on gas, began
commercial production in March 2021.

Cumulatively, these five units have the capacity to augment India’s domestic urea manufacturing capacity by 6.35-mtpa, which
is significant considering the urea demand-supply gap was of the order of about 8.3-mt in FY23 and estimated to have fallen to about
8.0-mt in FY24. In addition, two urea plants – each with 1.27-mtpa capacity – have come up: Matix Fertilisers and Chemicals Ltd.
(Panagarh, West Bengal) and Chambal Fertilisers and Chemicals Ltd. (Gadepan, Rajasthan).
Falling urea imports
While urea imports have fallen for two years in a row (setting aside some aberrations caused by Covid), further declines will depend
on a number of factors.

First and foremost is the ability of the new plants to ramp up operating rates. RFCL produced just 0.39-mt of urea in FY23. The
Gorakhpur plant of HURL, which commenced commercial production in May 2022, produced 0.84-mt of urea (66% operating rate) in
FY23, while the Sindri and Barauni units (which had not commenced commercial production in the year) produced about 0.17-mt as
part of pre-commissioning operations. The last financial year’s operations will give a firm indication of where production is headed.

The commissioning of the coal-based Talcher plant will also be eagerly watched for two reasons: the reliability of the technology;

Chemical Weekly May 7, 2024 123

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