Iffco in Rs 3,000 crore expansion plan

The Indian Farmers Fertilizer Cooperative Ltd, one of the largest fertiliser undertakings in the country, is on an ambitious expansion-cum-diversification program to grow exponentially by the end of the current decade.

As part of its 'Mission 2010,' the cooperative enterprise has drawn up Rs 3,000 crore (Rs 30 billion) investment plan to expand its production capacity and grow inorganically by foraying into commercial banking and power sector.

Iffco managing director U S Awasthi told rediff.com in Bangalore that the company had applied to the Reserve Bank of India for a license to set up a commercial bank with an up-front investment of Rs 500 crore (Rs 5 billion).

"We are awaiting the clearance of the RBI. Once we get the license, we propose set up the bank in six months, primarily to cater to the needs of farmers and other sectors of the economy," Awasthi stated.

In case an existing bank is available for acquisition with a potential to meet our requirements, we may explore that route. If cooperative banks, which clean up their balance sheet, are keen to merge, we are ready to take them on board," he said.

Though nationalised, regional and cooperative banks currently provide financial assistance to the farm sector under various schemes and through Nabard, Awasthi said Iffco was of the view that a dedicated bank with a host of services under one roof to farmers and agro-based industries would go a long way in meeting the growing demands of the farm sector.

"Over the decades, our farmers have been concentrating on producing food grains and other crops for domestic consumption. With better credit facility and right extension service, they can go for higher productivity and tap export markets," Awasthi asserted.

Iffco is also going high-tech to provide millions of Indian farmers with the latest information on agricultural practices for crops and their prices through touch-screen agri portal kiosks.

In a bid to take the benefits of information and communication technologies to rural India through a chain of cooperatives, Iffco has launched its first pilot project in Karnataka for disseminating information and data on farming products and related services in regional languages, with links in Hindi and English.

Apart from providing online portal kiosks to farmers on agricultural practices and crop prices, Iffco is planning to open Kisan Bazaars in the countryside for bringing goods of everyday use to their doorstep.

"We are earmarking another Rs 500 crore for setting up a chain of super bazaars to meet the daily needs of our rural populace. Besides essential commodities and general merchandise, the stores will sell agricultural inputs, including seeds, fertilisers, pesticides, irrigation pumps and farming implements," Awasthi disclosed.

With the government reducing its stake in the cooperative below 51 per cent after the last divestment, Iffco is looking at investment opportunities for leveraging its nationwide market presence and capitalising on its resources.

In the run-up, Iffco has bid for the coal-based 500MW power plant in Chhattisgarh. It plans to invest Rs 500 crore for an equity stake of 49 per cent in the project, in which Chhattisgarh and Gujarat governments are collaborating.

"The funding for our expansion plans will be partly through internal accruals and term loans from banks and financial institutions. We are earmarking another Rs 1,000 crore (Rs 10 billion) for expanding the existing production capacities in our Gujarat and Uttar Pradesh plants," Awasthi declared.

The Rs 6,019 crore (Rs 60.19 billion) Iffco has two plants at Kandla and Kalol in Gujarat and two more at Phulpur and Aonla in Uttar Pradesh, with a combined production capacity of 5.7 million tonnes.

Iffco is also investing an additional Rs 500 crore to produce phosphoric acid and fertilisers in its overseas' joint ventures in Senegal and Oman.

After establishing the 400,000-ton phosphoric acid plant in Senegal as a joint venture with Industries Chemiques Du Senegal, with an investment of Rs 92 crore (Rs 920 million) for 15 per cent equity stake, Iffco has embarked upon setting up an offshore manufacturing facility in Oman.

Roping in Krishak Bharati Cooperative Ltd (Kribco) as its Indian ally, Iffco has formed the joint venture Oman India Fertilizer Company at Muscat with Oman Oil Company as the foreign partner to produce 170,000 tonnes of nitrogenous fertiliser, including ammonia and urea.

The mega project is being taken up at a capital cost of $989 million, on a debt/equity ration of 2:1. Iffco and Kribco hold 25 per cent equity each, while the balance 50 per cent stake is held by the Oman oil firm.