Indian coal gasifier, fertilizer project faces delays

A large proposed coal-gasification and fertilizer project in eastern India is facing potential delays as the Covid-19 pandemic curtails operations at its Chinese contractor. The delays in starting construction work also come amid heightened tensions between Delhi and Beijing.

China's Wuhuan Engineering last year won the contract for the key coal-gasification and ammonia sections of the 132.8bn rupees ($1.77bn) project in Odisha state, following a tender by joint-venture company and project owner Talcher Fertilizers. The partners in Talcher Fertilizers are four state-controlled companies — leading coal producer Coal India, gas distributor Gail and fertilizer producer Rashtriya Chemicals with 31.85pc each, and fertilizer producer Fertilizer Corporation with the remainder.

The contractor had planned to start construction work around April-July this year, but the pandemic hit its ability to send workers, technicians and equipment from China to the project, an official from one of the joint-venture companies said.

Talcher Fertilizers had set a goal of starting to produce 1.27mn t/yr of urea by September 2023, through the gasification of a mixed feedstock made from high-ash Indian coal and petroleum coke. "But there could be a setback in terms of the timeline now," the official said. Wuhan Engineering declined to comment.

Talcher Fertilizers was allocated a captive coal mine with a capacity of 2.5mn t/yr. Coke, which will comprise up to 25pc of the feedstock blend, is expected to be sourced from state-controlled oil firm IOC's Paradip refinery on the country's east coast.

The pandemic's disruption of the supply chain from China has hurt economic activity globally. The commissioning of several Indian power projects, especially in the renewable sector, is being delayed as technology purchases from China slow.

Border tensions

India-China tensions escalated in June after the two countries' armies clashed in the Ladakh region of their Himalayan border. This has fuelled uncertainty over supplies of technology and the movement of technicians and company officials from China to India. Beijing and Delhi have long-standing border disputes, but the latest violence was the worst in about five decades.

The conflict has sparked calls in India for boycotts of Chinese products, raising the prospect of a deterioration in trade relations. Delhi has tightened imports of equipment used to build coal-fired and renewable power plants and set up departments to vet foreign direct investments from neighbouring countries.

The tensions could hurt India's expansion plans in sectors including power and fertilizer. India is one of the world's largest urea consumers. The Talcher project is part of a wider government aim to boost domestic urea production and reduce reliance on imports. The project is also a crucial part of government plans to promote the use of coal-gasification technology in other sectors and to cut back on LNG imports.

By Saurabh Chaturvedi