The Indian government has set aside some $1-billion to provide fertiliser companies with soft loans to create logistics and infrastructure facilities in African countries such as Eritrea, Ethiopia, the Democratic Republic of Congo and Ghana as a precursor to acquiring mineral assets in these countries.
“It is necessary to deepen economic cooperation leading to convergence of economic needs of two countries before mineral asset acquisitions can be successfully negotiated,” a senior official in India’s Department of Chemicals and Fertiliser said.
India has identified the African countries for the acquisition of fertiliser mineral assets like potash and rock phosphate; however, Indian fertiliser companies so far have been unsuccessful in concluding any overseas acquisition of raw material sources.
“It is very difficult to successfully gain access to overseas mineral assets, particularly in Africa, without long-term bilateral economic engagements. The model adopted by China has been very successful. Chinese companies invest heavily in infrastructure and logistics before gaining concessions for minerals. India needs to adopt a similar approach,” the official said.
“The Indian government proposes to spend $1-billion between 2012 and 2017 through government-owned fertiliser companies to establish sovereign commitments in the African countries. Subsequently, the corpus would be increased to fund mineral asset acquisitions,” he added.
Several Indian companies operate out of South Africa, Tunisia and Morocco but have not been able to extend their footprint into other countries owing to a lack of government support. The soft lines of credit were expected to fill this gap, the official said.
According to the Chemicals and Fertiliser Department, Indian demand for fertiliser would rise 4% to 61.27-million tons during 2012/13 with diammonium phosphate at 13.24-million tons, potash at 4.69-million tons, complex nutrients at 11.25-million tons and urea consumption forecast at 32-million tons.
India is fully dependent on imports to meet domestic demand for phosphatic and potassic fertilisers and imports about 10-million tons a year of urea.
However, government officials pointed out that large State-controlled companies like Rashtriya Chemicals and Fertilizers and the Indian Farmers Fertiliser Cooperative were pure fertiliser producers with no experience in mining. At the same time, India did not have standalone mining companies of the likes of Rio Tinto or BHP, which operate in a range of mineral assets.
As such, Indian fertiliser companies operating fertiliser mineral assets overseas or, likewise, an Indian coal or iron-ore mining company operating a fertiliser raw material asset, would be at a disadvantage, the officials pointed out.
Any long-term bilateral economic engagement with African countries leading to fertiliser mineral asset acquisition would have to adopt a consortium approach comprising Indian fertiliser, mining and infrastructure companies. But that would require a very high degree of management efficiency, officials acknowledged.