Update on production of DAP, complexes and urea

May 14: For reference purposes the website carries here plant-wise daily production figures of DAP, complexes and urea as on May 4, 2008. The information is provided in terms of the name of the plant, estimated production for the month, pro-rata estimated production as on May 4, cumulative production for the month up to this date and actual production on the date. Reasons for shortfall in production, if any, by any plant are also highlighted.   Details

Sterlite seeks alternate markets for phos acid and sulphuric acid

May 13: Sterlite Industries Ltd has briefed the DOF recently on its need to seek alternate markets -- outside of the domestic market for the sulphuric acid and phosphoric acid that it manufactures. The company had the following arguments to make:
8Sterlite is the prime supplier of Sulphuric and Phosphoric Acid to all the major fertilizer customers in south India like SPIC, CFL, MFL, FACT, Single Super Phosphate units like CFL, CPF & TFCL and all the Di-Calcium Phosphate producers (Animal & poultry feed). During 2007-08, owing to certain financial and raw material sourcing constraints, primarily on account of steep increase in international prices of raw materials, MFL, SPIC, TFCL, CFL(SSP), CPF & FACT have curtailed/stopped their production, forcing Sterlite to look out for alternate markets for acids to sustain copper production. Taking these factors into account, smelters like Sterlite has no option but to de- risk the production cycle by disposing acid in alternate markets.
8During the fiscal (2007-08), Sterlite`s  major customers SPIC and MFL could not buy even 50% (100% in case of MFL) of their committed annual offtake quantity,  forcing the Sterlite to take export orders.
Sterlite has argued that because of continuous production /disposal of both sulfuric acid and phosphoric acid -- in light of  very limited storage capacity -- any kind of restriction imposed on the export of these acids will affect the industry hard and may lead to plant closures.
(Click on Details for more information)   Details

Raw material purchase: FACT seeks Rs 400 crore Comfort Letter from DOF

May 13: FACT is never very far away from trouble.  It has now petitioned the DOF for a Rs 400 crore Letter of Comfort for procuring essential raw materials to manufacture seven lakh tonnes of Factamfos and two  lakh tones of  Ammonium Sulphate during 2008-09.  Apparently, the subsidy on these products is expected to be around Rs. 1800  crore per annum. FACT apparently requires atleast  three months of subsidy for rolling over the existing cash credit limit and hence the Letter of Comfort for Rs. 400 crore.
 8Since orders have been issued that IPL would be th sole procurer of imported raw materials like sulphur, rock, ammonia and phosphoric acid for FACT, the DOF has been asked to issue the letter to IPL.

Kribhco's MOU with North-West Chemicals and Fertilizers of Australia: DOF scared of committing further on buyback arrangement

May 12:  After providing an in-principle approval for captive buyback of urea to be produced through a JV between Kribhco and North-West Chemicals and Fertilizers of Australia with a capacity of between 1.5-1.75 million tonnes per annum, the DOF seems to be cagey about committing for more. The DOF does not want to be a signatory to the MOU that is to be signed between the two companies. Also, it does not want any obligation to be cast directly or indirectly on the DOF. The department claims that its obligation will remain limited only to the framework of the in-principle clearance given in an earlier letter to the DOF. The letter had said, "You are welcome to submit the details of firm feedstock allocation/Supply Agreement, terms and conditions and the pricing dispensation along with the schedule of urea off-take for further discussions and reaching an agreement on terms and conditions for the same. The above intent will remain valid up to two years from the date of issue of this letter, before which the terms and conditions for supply of urea and price need to be mutually finalised. In the event of non-agreement on price or any terms and conditions for supply of urea, this present intent will be treated as void."   Details

PSU banks to get 60% of public sector business: North Block bans competitive bids

May 12:  After ordering that Indian public sector companies should park at least 60 per cent of their funds with public sector banks, the finance ministry has come out with yet another instruction. The ministry now says that that in order to avoid undesirable competition among public sector banks for 60% of the funds with public sector companies -- which apparently leads to arbitrary hikes in interest rates (even for short periods) -- it has been decided that the practice of inviting competitive bids for bulk deposits should be discontinued forthwith. Companies should place their bulk deposits with banks(s) with whom they have a regular course of business, including public sector banks. The instructions have come after the ministry has taken offence to the fact that some PSUs have transferred their entire business or a substantial part of their business to private banks to the virtual exclusion of public sector banks.   Details

Fresh initiatives on urea: Full details

May 11: 8For reference purposes, the website carries here the complete details of the following proposals put up by the DOF for further processing by the cabinet: The reduction in individual fixed costs of a unit due to group averaging principle under NPS-III  be limited to 10% of the fixed cost of the unit as computed under RP. The provisions under NPS-III, as notified on 8th March, 2007, be amended to include the above provision.
 8The proposed to limit the increase in capacity utilisation' for post 1992 naphtha group to 95% under NPS-III from 90% under NPS-II. The concerned provisions of NPS-III will stand amended to this effect.
 8Proposal to recognize the additional urea from the revamp of existing units at 95% of Import Parity Price (IPP). The urea produced from existing units beyond their reassessed capacity under NPS or the maximum achieved capacity by a unit for 330 days in last four years (2003-07), whichever is higher (cut off quantity ), will be recognized as the production under revamp of the existing unit. However, the urea produced under revamp quantity will only be eligible for above dispensation once the total production of the unit crosses 105% of the cut off quantity or 110% of the reassessed capacity, whichever is higher. In case of total annual production being between the cut off quantity and the 105% of cut off quantity, the unit will be eligible for subsidy for the increased production in  accordance with the existing provisions of NPS-III.   Details

Mozambique investment: RCF told to rope in other partners

May 11: RCF plans to set up a massive urea-cum-phosphatic complex in Mozambique at an investment of Rs 7640 crore seems to be quite beyond the financial capability of the public sector fertilizer company. But given the fact that this is a good investment opportunity, the company's board has given a go-ahead to set up the project while at the same time directing the company's management to begin negotiations with other public sector companies -- like NMDC, NFL and Kribhco -- to bring them in as partners in the project.   Details

RCF MOU for urea, ammonia and phosphatic plants in Mozambique: Details

May 8: The website carries here details of the MOU to be signed between RCF and Industrial Development Corporation and Foskor, both of South Africa, for a ammonia, urea and phosphatic fertilizer plant in Mozambique.  The following are the salient features of the MOU:
 8The MOU shall subsist for a period of 12 months.
 8The Parties will investigate the setting up of an Ammonia -Urea and Phosphatic Fertilizers production facility at Maputo in Mozambique by sourcing rock phosphate from the Phalaborwa mines of Foskor in South  Africa and natural gas from Mozambican gas fields. If the project is proceeded with, implementation shall be done by a joint venture company to be formed by the parties.
 8The Parties will approach the Government of Mozambique for securing allocation  of nature gas on priority basis subject to availability of new  gas findings in Mozambique.
 8The Parties will enter into a formal understanding with the Government of Mozambique for providing and infrastructure  at a suitable location  in Maputo in Mozambique and, furthermore, may introduce a joint venture partner from the Mozambican side as may be proposed by the Government of  Mozambique.
 8During the subsistence of this MOU, the parties shall not enter into any  negotiations or any agreement of whatsoever  nature with  any other third party in respect of the project.
 8The Parties shall jointly prepare a techno economic feasibility report and a detailed feasibility report. The costs of the TEFR and DFR shall be shared by the Parties as to 50% jointly by IDC and /or Foskor, and 50% by RCF. The TEFR and DFR shall  be owned by the Parties jointly.   Details

RCF JV for port infrastructure:Ambitious plans

May 8: RCF has been allotted 10 acres of land at Vizag and 2.96 acres of land (12000 sq.meter) at Tuticorin) by the respective port authorities on 30 years lease for development of infrastructure and its operation. The company plans to promote a joint venture for effective operations of infrastructure to be built in the land acquired in the two ports:
 8One single joint venture with more than two partners be formed to look after the operations of infrastructure to be built in the two ports, plus for other possible ports such as Kandla.
 8The JV will not jsut operate warehouses but should have the objective of covering the entire logistic business, including storage, inland transport, coastal transport and  allied areas. At a future time, the JV could also consider going into the shipping business.
 8The JV could be named "RCF Logistic Pvt.Ltd.", with RCF holding of 49% while other partners should not have more than 20% stake.
 (Click on Details for more information)   Details

IPCL caught in a financial squeeze

May 8: Indian Potash Ltd has begun feeling the squeeze resulting from the DOF`s inability to make payments on time. The funds position has been very tight all through 2007-08 and is gradually getting worse. The DOF`s preference has always been to make `on-account` payments of claims for the current year while ignoring payments of huge accumulated balance payments of the earlier years.
 8IPL claims that payments have not yet been fully made to settle balance 15% claims for the period upto 2006-07 for all products and other claims arising out of buffer stocking.
 8Also not paid are differential payments for 2007-08 for the first half of the year for which final rates of concessions have already been announced as well as the balance 15% payment for the period
 8Also not paid are `on-account`  payments from January, 2008 onwards
 Comment: The squeeze is indeed very hard for IPL given the fact that the company has no other way of making up the gap expect to borrow heavily and pay interest which is not disbursed by the government.   Details

Details of the JVC between RCF, Kribhco and NFL

May 7: The website carries here details of the Joint Venture company floated by RCF, NFL and Kribhco to explore the the possibility of investments in nitrogenous, phosphatic and potassic sectors in resource rich countries. The name of the JV will be Urvarak Videh Ltd. The equity capital will be equally divided among the three promoters. The following are the salient features of the company:
 --The authorized capital of the Company will be Rs. 5 crore.
 --Paid up capital of the company will be Rs.15,00,060. RCF, Kribhco and NFL will contribute Rs.5,00,020 each.
 --Additional capital contribution will be shared equally by the promoter companies as and when required for the business.
 --The Board of Directors shall consist of minimum 3 and maximum 12 directors. Unless and otherwise mutually agreed between the parties all the directors on the Board shall be on part-time basis.
 --Chairman will be appointed from amongst the directors on rotation basis for a period of one year. The first Chairman will be appointed in the first Board  Meeting of the JVC.
 --The Lock in period for shares shall be 6 years .
 (Click on Details to find out more on who the directors of the company would be)   Details

RCF seeks capital grants and soft loans for revival of Durgapur and Talcher plants

May 7: The website carries here details of the financing patterns suggested by RCF for the Durgapur, Talcher and Thal-III fertilizer plants. The costs of the three projects have been pegged at Rs 3241 crore, Rs 3178 crore and Rs 3156 crore respectively. Of this RCF wants to contrinute equity capital to the tune of Rs 100 crore in Durgapur and Talcher each while it is willing to shell out Rs 200 crore for Thal-III. The company  has sought a GOI soft loan at a rate of interest of 4% to the tune of Rs 400 crore each for revival of the two sick units and Rs 402 crore for Thal-III. A GOI capital grant of Rs 800 crore has been sought for Durgapur and Talcher each while the rest of the money would come in by way of loans from banks.
Comment: Clearly, RCF`s financing plan will not find favour with the government. A Group of Ministers (GOM) meeting on the issue had clearly stated that the revival of closed units shoul dbe through the least cost route. That leaves out government support to these units,. The moot point now is whether public sector companies would be wiling to foot such a large burden.   Details