RCF eyeing assets in the Middle East, Africa

What are currently the major concerns, considering the situation in India is not very conducive?
The concern obviously is the proposed increase in gas prices from the next year and its availability to us at an affordable price. The other concern is rapid rupee depreciation which is causing a big impact on our bottomline by making imports dearer for us. Dealing with this is a major challenge.

What is the kind of impact of the rupee depreciation on your financials?
Our first quarter results saw a substantial impact on the bottomline. Though we passed on part of the cost increase to farmers, there is still a limit to which we can pass on.

What is the outlook of pricing of fertiliser products in India?
In the beginning of the month, prices of di-ammonium phosphate (DAP), second most consumed fertiliser after urea, had come down from $520 per tonne in May-June to $430 per tonne. In the case of muriate of potash (MoP), we are expecting the prices to come down to around $300 from the current level of $427 sooner or later, and that is when we can import and our cost of production will also come down partly. Similarly, for urea, the prices are coming down substantially to around $300 per tonne from almost $400 per tonne and this is the kind of level where it is expected to remain in the current year. Therefore, the prices are getting corrected by about 15-20% in all categories. Once that happens, we expect them to be at that level for the current year.

How much do MoP and NPK contribute to the overall volumes?
In a good year, we sell close to 3 lakh tonne of MoP and make around 6-7 lakh tonne NPK per year and they are largely import-driven for raw material requirements. So, a drop in rupee could impact earnings, even if their prices are coming down.

Are you looking at increasing your presence in the trading business?
The Indian government has asked RCF to form a consortium and discuss with foreign suppliers on long term off-takes. We are currently discussing with a Canadian as well as a European company for potash off-take. When we have the long term off-take agreement, we can have some preferential pricing also, which can then help us market more of these products. Similarly, we are also talking to some companies to tie up resources for rock phosphate and set up phosphoric acid plant. Third, we are still looking at the Ghana project to set up a urea plant. This will augment Indian domestic capacity; help us in marketing and trading in India.

Do you think the new urea investment scheme will really help the industry?
The major issue now is the gas pricing and gas availability. Unless that is sorted out, large-scale investments will not be possible, although we still think some new capacities will definitely come in the next few years. For us, we are expecting Thal III will come up where we will be putting up 1.27 million tonne urea plant, almost 60% of our current capacity. Our board has given the approval, but subject to the government approval and long-term gas tie-up.

From where the next level of growth will come from?
Thal III, Talcher, our new plant in Ghana and off-take of potash on a long-term basis from suppliers in Canada and Europe will bring in the next level of growth. We are also very keen to pick up rock phosphate assets in Africa and the Middle-East. All these projects together will give the thrust RCF needs at this time.

What is the current status on the coal-gasification project at Talcher?
We had first decided to go on a build-own-and-operate basis and we had put up a tender also for the same. Since we did not get any response to that, we decided to develop the project on a lumpsum turnkey (LSTK) basis. Now we are hoping to get some positive response on this as the joint venture will be funding it instead of the contractor. GAIL has also come back in the joint venture and now with RCF, Coal India and GAIL backing the project, we are hoping that once tenders are floated, contractors will readily come.

Will this year’s subsidy increase beyond last year’s subsidy requirement?
Last year there was an unpaid subsidy of around Rs30,000 crore and the budgeted amount was Rs65,000 crore and this was disbursed this year, hence the total subsidy burden was Rs95,000 crore. This year, the prices have come down but the rupee too has depreciated so it is back to square one and we are expecting the subsidy to be more or less at the same level as last year or marginally up or down.