Nepal pursues self-sufficiency in chemical fertilizers

Aiming to reduce the nation’s reliance on imported chemical fertilizers, the Nepal Oil Corporation (NOC) has unveiled ambitious plans to establish a domestic fertilizer manufacturing facility. This strategic move comes as Nepal currently imports 100% of its chemical fertilizer needs from abroad, incurring substantial costs exceeding Rs 40 billion ($300.5mn) annually.

Dr. Chandika Prasad Bhatta, Executive Director of NOC, revealed that the corporation has meticulously laid the groundwork for this ambitious project, envisioning a public-private partnership (PPP) model for its execution. “The plan is to operate the factory on a PPP model,” he stated.

During the fiscal year 2022/23, Nepal imported a staggering 426,007 metric tons of chemical fertilizers, amounting to a cost of approximately Rs 40.5 billion ($304.25mn). The NOC believes that establishing a domestic fertilizer industry could significantly reduce the country’s trade deficit, as the substantial sums currently spent on imports could be retained within the national economy.

To attract the substantial investment required, estimated to exceed Rs 100 billion ($751.25mn), the NOC is actively seeking foreign investors. Notably, the Indian Oil Corporation (IOC) has expressed willingness to participate in this endeavor. “With the investment of IOC, chemical fertilizers can be produced and exported even to India,” Bhatta remarked enthusiastically.

The NOC envisions a natural gas-based chemical fertilizer facility, with plans to import natural gas from IOC. This approach aligns with a government study that recommended a natural gas-based model over water electrolysis technology, citing lower costs and reduced environmental impact.

Dr. Bhatta emphasized the widespread consensus on the necessity of a domestic fertilizer factory, stating, “Everyone agrees that timely distribution of fertilizers to farmers is crucial. This can only be achieved through establishing the industry locally.” The government’s annual allocation of Rs 32 billion ($240.40mn) in fertilizer subsidies could potentially be channeled towards supporting this endeavor.

The pursuit of a domestic chemical fertilizer industry has been a longstanding aspiration, with discussions spanning nearly four decades. Previous governments have conducted feasibility studies and allocated budgets, but the project has yet to materialize. Stakeholders now believe that a natural gas-based facility could provide a sustainable solution to Nepal’s fertilizer supply challenges.

As negotiations with IOC progress regarding the supply of natural gas and the potential laying of a pipeline to Bhairahawa, the NOC remains committed to attracting foreign investment, engaging the private sector, and leveraging government resources to bring this ambitious project to fruition, paving the way for Nepal’s self-sufficiency in chemical fertilizer production.