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Government plans feasibility study for chemical fertilizer plant

The government plans feasibility study to establish a chemical fertilizer plant in Nepal.

Investment Board of Nepal is inviting Expression of Interest from interested national and international parties to conduct feasibility study to establish $1 billion ammonia and urea fertilizer plant in the country.

The government has – in the current fiscal year’s budget – allocated Rs 350 million for the feasibility study of the plant. The government is also ready to provide additional budget for the study, if needed.

The selected firm will do feasibility study and select a suitable location for setting up the plant, according to the Board that looks after projects over Rs 10 billion only.

The party will study technical feasibility, economic and financial evaluation and environmental and social impact assessment and mitigation measures of the project, it said, adding that the study will also recommend whether or not the plant is technically, socially and financially feasible. “It will also recommend the government on investment models and operational
structure.”

The board will take four months to select the party that will take one year to complete the study.

The interested party will also have to study existing and projected demand for chemical fertilizers and also explore export potentials.

Though agriculture contributes one third to the total gross domestic product (GDP), the country is dependent on fertilizer import. The establishment of a chemical fertilizer plant would give respite to the 66 per cent of the total population, who are dependent on agriculture.

Easy avaibility of the chemical fertilizers will give boost to the agriculture output. Currently, national average paddy production is only 3.4 tonnes per
hectare. But the easy avaibility of fertilizer will double the output, especially of paddy. Paddy covers around 50 per cent of total cereal production in the country.

The use of chemical fertilisers increased to 57 kg per hectare in the last fiscal year from 47 kg per hectare a fiscal year ago, according to the Agriculture Ministry. During the last fiscal year, the government had supplied 134,500 tonnes of fertilizers.

According to 2012 estimation of Agriculture Ministry, the existing annual demand for chemical fertilizers stands at around 700,000 tonnes.

But the country imported 195,000 tonnes of chemical fertilizers – excluding  informal imports – in the last fiscal year 2013-14, according to the ministry.

Earlier, a feasibility study by Japan International Cooperation Agency (JICA) in 1984 had suggested the government to set up a plant with an annual capacity of 100,000 tonnes in Dhalkebar.

The government move to establish the plant is aimed at ensuring an adequate and steady supply of plant nutrients and cushion the impact of volatile prices on the international market will save the country more than Rs 14 billion annually, apart from Rs 5 billion on subsidy.

However, the government subsidised fertilisers fulfil just 25 per cent to 30 per cent of the total demand, and the rest is met by informal imports or contraband brought through the porous Nepal-India border.

The proposed plant – with private sector investment will have an annual production capacity of 500,000 tonnes – is also expected to reduce the country’s dependency on imports and lead it to self-sufficiency in soil fortifiers.

In 2006, a Finance Ministry study had revaled the share of informal fertilizer imports at 71.6 per cent. The current annual requirement stands at 700,000 tonnes, according to the Agriculture Ministry that claimed that around 50 per cent fertilizer is used for paddy and 15 per cent for maize.

However, the Agriculture Perspective Plan (APP) 1992-2015 had estimated that chemical fertilisers would contribute to a growth of 64 per cent to 75 per cent in the agriculture sector and recommended to increase fertilizer supply by 8.5 per cent per annum. The Plan had also targeted fertilizer consumption to reach 131 kg per hectare until 2015.