KOLKATA (miningweekly.com) - With India’s foreign exchange reserves touching an all-time high of $322-billion, the country’s Department of Fertilisers has revived a three-year-old proposal to create a sovereign fund for the acquisition of mineral assets overseas.

An official said that the proposal was still at a nascent stage and yet to be discussed with the Finance Ministry and, as a result, he could not comment on the size of the fund aimed at securing foreign assets.

Four years ago, the Department of Fertilisers completed the groundwork for creating a $1-billion sovereign fund for ensuring fertiliser supply security, establishing linkages with mineral assets overseas.

However, at the time the current account deficit was rising, oil prices were high and the bill for energy imports was on the rise. Today, the economic scenario is looking vastly different, with oil prices at historic lows, the energy import bill declining and higher foreign exchange reserves, which prompted the Department of Fertilisers to look again at the possibility of creating a sovereign fund.

The high reserves had pushed the Reserve Bank of India to mop up dollars from the currency market, create a war-chest of its own and check rapid appreciation of the Indian currency.

The Department of Fertilisers last year nudged the government-owned fertiliser companies Rashtriya Chemicals and Fertilizers, Gujarat Narmada Valley Fertiliser Corporation and Gujarat State Fertiliser and Chemicals, to form a consortium to establish a urea and chemical project in Iran, based on cheap gas availability in that country.

Several Indian fertiliser companies operate out of South Africa, Tunisia and Morocco but they have not been able to extend their footprint into other countries due to a lack of government support and the soft lines of credit would fulfill this gap, the official said.

A sovereign fund would enable such companies to acquire assets overseas without excessively leveraging their own balance sheets, he added.

Similarly, an NMDC-led consortium was currently completing a due diligence on picking up a 30% equity stake in Russian potash miner Acron.

The revived proposal for the sovereign fund was also expected to find support from the domestic fertiliser industry with the Fertilizer Association of India pushing for such a fund since 2011.

At present, the country’s domestic production of urea was pegged at 22-million tonnes a year, which had been stagnant for the last decade, and it  was dependent on imports to meet total demand of about 30-million tonnes a year. India was 100% dependent on potash imports, averaging about 3.5-million tons a year while import dependency for rock phosphate was at 85%, shipping in an average eight-million tonnes a year.