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Description

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The chemical fertilizer plant project envisions to set up a modern urea plant in Nepal with the capacity of at least 500,000 MT/year for import substitution.


The importance of the agricultural sector for Nepal is a fact known to all. This sector has however performed sub optimally due to several challenge confronting the irrigation system, availability of fertilizers, market access, and mechanization and modernization of farming. Particularly, the need for adequate fertilizers has always remained at the heart of all the issues. Demand for fertilizers is every increasing and in the absence of domestic supply, there is almost always a supply constraint and burden upon the government to subsidize the higher costs of imported products.

 

Salient Features

Investment Size (Approx) USD 1.4 Billion
Lastest Feasibility Study Feasibility study report on the establishment of urea fertilizer plant in Nepal" , JICA; 1984
PPP Model N/A
GoN Partner/s Ministry of Urban Development (MoUD)
Ministry of Agricultural Development (MoAD)
Location N/A

Expected Benefits

The increasing demand for fertilizers in Nepal is evident from Chart 1. (18% approx. annual growth rate). This surging demand is currently partially met through imports from India and China and subsidized by the government. Establishment of a domestic chemical fertilizer plant can both bridge the demand gap and help reduce government burden. 

Enhancement of agricultural productivity
Production of fertilizers dometically is expected to boost the use of fertilizers by making it readily available inside the country.

Import substitution
Domestic production will help reduce the country's dependence on import of fertilizers from outside which stands around 230,000 tons a year worth approx. Rs 11.61 Billion (AIC, 2013 ). Total annual demand for chemical fertilizers is expected to be approx. 700,000 tons a year (AIC, 2013)

Reduction in government burden
The govenment currently provides subsidy of Rs 5 Billion (AIC, 2013) for fertilizer consumption to the farmers.  

Employment
Greenfield investment in the sector is expected to promote direct (approx 300; JICA 1984) and indirect employement and contribute to regional development.

Self sufficient technology
The lastest technology has a record of being highly energy efficient. For e.g. to produce 2 Milion MT of fertilizer a year, Chambal fertilizer plant , India requires 200MW of energy. Around 182MW of this requirement is generated within the manufacturing process by recycling waste heat. 

Milestones

IBN Project Cycle

Phases of Project

Challenges

  • Environment impact: Environment ramifications are uncertain given the size and novelty of the project.
  • Supply of power: Obtaining dedicated power supply under current circumstances.
  • Land acquisition: Acquiring the huge land requirements of the project will take time and money.
  • Low returns: Without low power cost, the project returns are low and unattractive for private investors.
  • Existence of import from unofficial channels.

Way Forward

  • Update the feasibility study of the project

Infograph

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Photos

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