Fertiliser Plant in Nepal One Step Closer

After four decades of stalled plans, Nepal has taken a major step toward setting up its first chemical fertiliser plant.

Two years after signing a Memorandum of Understanding (MoU) with DIAG Industries GmbH of Germany for Preparation of Detailed Feasibility Study Report for Establishment of Chemical Fertiliser Plant (Urea) in Nepal, the Investment Board Nepal (IBN) has received a detailed feasibility study (DFS) report. The MoU was signed on July 13, 2023.

According to IBN, its March 31, 2022 meeting had decided to issue a survey licence to DIAG Industries GmbH following an unsolicited proposal the company submitted on June 18, 2020.

IBN spokesperson Pradyumna Prasad Upadhyay said DIAG Industries prepared the DFS to invest on its own and submitted it to the board.

Three production models

The study proposes three methods for fertilizer production: natural gas, electrolysis, and a hybrid process. Both urea and ammonium nitrate can be produced using all three technologies, while the hybrid model can generate both simultaneously. Building a plant using all three methods would take around three years and five months.

The proposed site is Sarawal Rural Municipality in Nawalparasi (Bardaghat-Susta West), on 161.87 hectares of land. The project will operate under DIAG Surya Green Fertilizer Pvt. Ltd.

Upadhyay said it is yet to be decided which method will be adopted. A natural gas-based plant would be cheaper to run, while an electrolysis-based facility would be costlier.

“The DFS estimates an investment of no less than Rs 240 billion, with three alternative models for production,” Upadhyay said. “The German company has already established 162 fertiliser plants worldwide.”

Capacity and conditions

The proposed plant would produce 2,000 metric tonnes of urea daily through natural gas and 1,500 to 1,900 metric tonnes of ammonium nitrate via electrolysis. Under the hybrid method, it would generate 750 metric tonnes of each fertiliser daily.

The company has set several conditions for investment, including: a five-year tax holiday, three-and-a-half years for plant construction, an uninterrupted supply of 300 MW electricity, and permission to operate for 30 years.

Long history of studies

Nepal has attempted to set up a fertiliser plant for decades. The first feasibility study was conducted in 1984 by the Japan International Cooperation Agency (JICA), which recommended water electrolysis technology.

In 2015, a joint study by Infrastructure Development Corporation (Karnataka) Ltd., the Institute of Agricultural Technologists, and Shah Consult International Pvt. Ltd. suggested natural gas technology for urea production, while also proposing coal and water electrolysis as alternatives.

The government’s budget for fiscal year 2021/22 also pledged to build a fertilizer plant within three years. The latest DFS revives that ambition with a clearer roadmap.

The Ministry of Agriculture and Livestock Development estimates Nepal’s annual demand for chemical fertiliser at around 1.3 million tonnes.

Minister for Agriculture and Livestock Development Ramnath Adhikari said on Thursday, August 14, that the budget allocated for procuring and supplying the targeted amount of chemical fertiliser this fiscal year was insufficient.

Responding to lawmakers’ queries in the House of Representatives, Adhikari said 491,000 tonnes of fertiliser—the highest ever—were imported last fiscal year, using almost all of the subsidy budget (Rs 26.83 billion of Rs 27.36 billion).

Even so, the supply fell short of demand, which has tripled in the past two decades with the growth of commercial farming and use of hybrid seeds.

Adhikari said the Rs 28.82 billion allocated for supplying 600,000 tonnes this fiscal year would fall short. “It will require Rs 44 billion to meet the target,” he said. “At current prices, the budget would only cover 360,000 tonnes.”