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Iffco goes global with offshore plants in Oman, Tunisia

Fakir Chand in Bangalore

The Indian Farmers' Fertiliser Cooperative Ltd, the largest fertilizer company in the cooperative sector, is going global with joint ventures in Africa and the Middle East for augmenting its production at lower cost.

Having successfully set up the 400,000-ton phosphoric acid plant in Senegal as a joint venture with Industries Chemiques Du Senegal, at an investment of Rs 921 million for around 15 per cent equity stake, Iffco has embarked upon setting up two more offshore manufacturing facilities in Oman and Tunisia.

Roping in Krishak Bharati Cooperative Ltd as its Indian ally, Iffco is setting up the joint venture Oman India Fertilizer Company at Muscat with Oman Oil Company as the foreign partner to produce 170,000 tons of nitrogenous fertiliser, including ammonia and urea.

The mega project is being taken up at a capital cost of $989 million, on a debt/equity ration of 2:1. Iffco and Kribco hold 25 per cent equity stake each, while the balance 50 per cent stake is held by the Oman oil firm.

"The project construction will commence next month and is scheduled to be completed in 36 months from the zero date. We will ship the fertilisers directly to India at Karwar port on the west-coast of Karnataka," Iffco chairman K Srinivasa Gowda told rediff.com in Bangalore on Tuesday.

With Iffco's four Indian manufacturing plants located at Kalol and Kandla in Gujarat and at Phulpur and Aonla in Uttar Pradesh, which are far away from its main marketing zone, namely south India, the Rs 51-billion company had decided to set up its additional plants overseas for want of raw materials and also to reduce their imports.

"We have decided to locate the new plants in these African and Gulf countries as the raw materials are available in abundance there for producing urea, phosphate fertilisers and other intermediates.

"The cost of natural gas and overheads also being cheaper in these oil-rich countries, we will have a price advantage in the growing Indian market," Gowda said, adding that it would equally be economical to ship the produce from Oman directly to Karwar port than transport it from our plants in Gujarat and UP to the southern market," Gowda asserted.

Similarly, Iffco has joined hands with the Andhra Pradesh-based Godavari Fertiliser & Chemicals Ltd to enter into a memorandum of understanding with Groupe Chimique Tunisien and Compagnie des Phosphates de Gafsa of Tunisia for setting up jointly a phosphoric acid plat at Skhira in Tunisia.

The offshore project is estimated to cost about $260 million, with an installed capacity to produce around 540,000 tons of phosphoric acid. The funding pattern of the project envisages a debt/equity ratio of 7:3.

"We are waiting for clearance from the government to go ahead with the proposed project, in which two Tunisian companies have committed to bring in their stake.

"As in the case of our Senegal plant, about 50 per cent of the production from the Tunisia plant will be shipped to India for domestic use, and the balance will be sold in the international markets, which have been reeling under lower prices and demand recession," Gowda disclosed.

"Iffco's Mission 2005 aims at utilisation of global resources by forming more such joint ventures in strategic overseas' locations for sourcing raw materials at cost-effective rates for producing complex fertilisers as well as urea," Gowda claimed.

The cooperative company is also consolidating its market leadership across the country by setting up its distribution network, including retail outlets and kiosks with credit facilities to even marginal farmers.

"With the lifting of quantitative restrictions on imports from April 1 and global downward price movement of fertilisers in the post-WTO regime, multinationals are targeting the Indian market in a big way, as demand always exceeds supply, and except urea, all other such items have been decontrolled," Gowda said.

Iffco's combined production during the fiscal year 2001-02 has been 5.5 million tons, with the entire stock being sold out for a turnover of around Rs 51 billion. It posted a pre-tax of Rs 3.72 billion and a net profit of Rs 3.08 billion respectively.

Asked about the impact of the ongoing drought-like situation prevailing in most parts of the country, Gowda said the off-take of fertilisers by farmers would be 50 lower than what it was during the last year if rains continued to elude as many states.

"It is too early to say what will be the total impact on the marketing front as two months are still left for the current south-west monsoon to recede. Let's hope and pray that rains resume and spread uniformly for a revival of the agricultural activity," Gowda pointed out.

Meanwhile, the multi-unit cooperative society has entered into a collaboration with the Bangalore-based Indian Space Research Organization for developing the agro-climatic Geographical Information System using satellite imagery.

The system will provide data on land use, land cover information, monthly crop area changes, irrigation/rain-fed area, soil types, rainfall patterns, weather and satellite images.

Iffco's logistics and infrastructure will also be streamlined for speedy decision-making on marketing and distribution by using the GIS.

"We are also planning to set up cooperative kiosks for disseminating information to farmers through the Internet, besides facilitating delivery of farm products and services tailored to meet their needs," Gowda said.

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