Coromandel hit with $30 mn cost over run in Tunisian project

The Murugappa Group company Coromandel International Ltd said, the delay in commissioning the Tunisian Indian Fertilisers Company Limited’s (TIFERT’s) plant has resulted cost overrun to the extent of $30 million.

It may be noted, Coromandel International Limited and the Gujarat State Fertiliser Corporation (GSFC) signed a joint venture agreement with Groupe Chimique Tunisien (GCT) of Tunisia in 2005, for manufacture of phosphoric acid at La Skhira, Tunisia, at an estimated cost of $180 million.

The JV company, Tunisian Indian Fertilisers SA (TIFert SA) has been formed at Tunis in Tunisia.

“The plant which was originally expected to be commissioned by the first quarter of 2011 got delayed mainly due to the political developments in Tunisia last year,” according to company’s annual report.

The delay has caused cost overrun to the extent of $30 million and the Board of Directors of the company in terms of the JV agreement had approved an additional investment of $5 million towards its share by way of equityôloan.

With the restoration of normalcy in Tunisia, according to Kapil Mehan, Managing Director, Coromandel International, work is going on in full speed and we expect that commercial shipments should start by September from that plant.

“We had our team along with GSFC visit the site and see the facilities and the most facilities are now under precommissioning trial stage. By August, we should have the commercial production starting and we expect that first shipment should sail out of Tunisia by September, but civil situation is still not normal.”

Coromandel International made a strategic investment towards 15 per cent equity stake in TIFERT and is aimed at securing uninterrupted supply of phosphoric acid for the company’s operations.

In 2011-12, the company spent around Rs 5,860.65 crore for the consumption of raw materials compared to Rs 4,991.07 crore in 2010-11, an increase of around 17 per cent. Of this, money spent on phosphoric acid alone was Rs 2,343.12 crore as compared to Rs 2,203.56 crore, an increase of around 6 per cent.

It may be noted in 2011-12, the company faced shortage of a key raw material - phosphoric acid, impacting production and it had to resort to import of phosphatic fertiliser to maintain supplies to the farming community. The company also stated fertiliser consumption is increasing at a steady pace, while the domestic capacity of fertiliser manufacturers is not increasing due to a lack of fresh investments resulting in increased imports of fertilisers.

“Lower investor interest is due to limitations in availability of natural gas, phosphoric acid and other key inputs are the reasons,” said the company.