Iffco in $1 bn Egypt, Kutch plan

The Indian Farmers Fertiliser Cooperative (Iffco) plans to invest $1 billion in setting up a joint venture phosphoric acid plant in Egypt, another self-owned phosphoric acid plant at Kutch in Gujarat and a rock phosphate mining venture in Egypt for supplying raw material to its Indian units.

Iffco also proposes to invest in energy saving techniques at its existing units to prune the cost of urea production and undertake carbon trading as allowed by the Kyoto protocol on climate change.

The proposed two phosphoric acid units and the rock phosphate mining venture together will involve an investment of $800 million over four years.

The energy saving project will involve an additional investment of $200 million. These investment proposals were cleared by the Iffco board today. Iffco is the world's largest fertiliser manufacturing company in the cooperative sector.

With these expansion proposals, Iffco's fertiliser production capacity would rise to 8.6 million tonne a year from the present 6.1 million tonne.

"The target is to achieve 10 million tonne production level in the medium term", chairman Surinder Kumar Jakhar told newspersons today.

About the proposed new ventures, managing director U.S. Awasthi said the 5,00,000 tonne phosphoric acid plant would be set up as a joint-venture with El Nasr Mining Co (ENMC) of that country.

Iffco would hold majority equity of over 75 per cent along with management control. Enmc would supply rock phosphate for the project and IFFCO would buy the entire output of phosphoric acid. "This will lend stability to the international prices of phosphoric acid", Awasthi said.

The second phosphoric acid plant at Kutch in Gujarat, with a capacity of 5,00,000 tonne of phosphate (P2O5), would be wholly owned by Iffco.

Besides, Iffco was in advance stage of negotiations with a government entity in Egypt to undertake rock phosphate mining in that country. This venture would involve production of about two million tonne of rock phosphate a year to feed the phosphoric acid plant in India.

Another diammonium phosphate (DAP)-cum-mixed fertiliser (NPK) plant with a capacity of 1.8 million tonnes a year would be set up in Kandla. The new facility with latest know-how would also be fully owned by IFFCO, he said.

"Iffco was targeting a debt equity ratio of 2:1 for the total $1 billion business plan", Awasthi said.

Negotiations were in progress with domestic and foreign banks and financial institutions to tie up the debt funds worth around $ 670 million. The rest $330 million would be mopped up towards equity from Iffco's own resources.

Financial closure for all its new projects would be completed during the current year itself. Commercial production would commence in the first quarter of 2009.

Giving details about Iffco's financial performance, its managing director said the cooperative giant would earn a profit after tax of Rs 320 crore in 2004-05. In the current fiscal, the profit was projected to rise further to around Rs 500 crore.

He said Iffco was planning to draw carbon from the atmosphere for its urea production units. This would enable it to go in for carbon trading under the Kyoto protocol. A deal had already been made with a Japanese company for selling carbon at a rate of $6 per tonne. This would help Iffco to earn about Rs 20 crore a year.