In its maiden foray into the fertiliser sector, state-owned Engineers India Ltd will take up equity in the Rs 4,000 crore revival of the Ramagundam urea plant in Andhra Pradesh.

EIL will join National Fertiliser Ltd (NRL) to take at least a 51 per cent stake in the Ramagundam revival project, which is expected to cost about Rs 4,000 crore, an official privy to the development said.

The Ramagundam plant of Fertilizer Corp of India (FCI) has been closed for years now and is it one of the three plants that the government has now decided to revive by inducting credible partners.

“A Cabinet note for revival of the three plants is already in circulation and the Government will take a decision on it soon,” he said.

EIL and NFL in January conveyed their “in-principle” intent to take part in the revival of the Ramagundam fertiliser unit of FCI to the Ministry of Chemicals and Fertilisers, subject to final due diligence based on the economic package to be decided for revival of the closed units by the government.

FCI will hold 11 per cent in the special purpose vehicle that will be formed for revival of the Ramagundam plant. The EIL-NFL combine will take at least 51 per cent in the company, while a partner for the rest is yet to be decided.

The Ramagundam plant will manufacture urea and ammonia using natural gas as feedstock. The plant was coal—based when it was commissioned in November, 1980, the source said, adding that the government has decided to revive the plant using gas as feedstock.

“Nothing of the old plant will be of use and altogether new machinery will be set up using gas-based technology,” he said, adding EIL will do design, engineering, contracting and construction of the plant.

After the plant is built in four years, it will be jointly run by EIL and NFL.

This will the be maiden foray into the fertiliser business for the engineering consultancy firm, which till now was more focused on oil and gas projects.

The proximity of the Ramagundam plant to an existing gas pipeline will reduce the operational cost, he said.

EIL had recently commissioned SBI Caps to carry out due diligence on the project for revival of the Ramagundam plant.

EIL will also explore possibilities to participate in setting up a power plant of at least a 500-megawatt capacity at Ramagundam.

(This article was published on March 24, 2011)
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