Interventions in Fertiliser Manufacture

Calyanatissa GUNAWARDHANA

Way back in the 1970s the Sri Lankan Government, “in its great leap forward” towards industrialisation embarked on numerous industrial ventures in the petrochemical sector, priority was accorded to the manufacture of urea.

Naphtha, was readily available from the oil refinery at Sapugaskanda, which in the 1970s found no application within the country and at best had to be exported. Thus, the concept of manufacture of urea based on naphtha as the feedstock was an acceptable proposition.

Urea plant

The urea plant was installed and commissioned by the multinational Kellogg of U.S.A. at a cost of US$ 171. It took nearly 4 years from the date of launch of construction to commissioning of the project. The plant had a capacity of 545 tonnes per day of urea and 940 tonnes per day of urea. The plant operated for 4 years from 1982 to 1985 and thereafter the production was suspended.

The suspension was triggered by poor counterpart support and gross mismanagement, a common malady in the public sector. The project was infested with ‘post-masters’-bureaucrats who held to their posts without recruiting experts in the field, a common malady seen in the state sector even to this day. It was misinterpreted as an economic failure. This was partly attributed to the high capital costs primarily as a result of the manoeuvres made by vested interests. Ironically, the Sri Lankan government did not introduce legislation to protect the industry (a facility extended to all other industries in both the private and public sector at the time), to protect the nascent fertilizer industry.

Used plants

After production was suspended it went under the hammer. Ten companies did bid to acquire the plant. The bid demand was high due to the fact that the economics of relying on used plants (which were available at a fraction of the cost of a new plant) are enormous. The capital costs for a new plant, the time to complete the project and the breakdown of installed costs are advantageous and would be less than half the value of a totally new plant. This has far-reaching impact on interests on loans, depreciation and return on equity. This is accomplished without undermining efficiency. If at the time, the Government wrote off the cumulative debt accrued (up the time of the sale) then the State Fertilizer Manufacturing Corporation, with management expertise from overseas could have run it as a viable project.

The following news feature describes the relocation of the plant in UAE, 29th July 1996 (Source: ACN).

“.... Southern Petrochemical Industries Corp (SPIC) a company based in South India is planning a 1000 tonne/day (330,000 tonne/year) urea facility in Jebel Ali, (an investment zone) in the United Arab Emirates, based on a plant to be relocated from Sri Lanka.

The Indian company is awaiting environmental clearance from the UAE government and expects the go-ahead to be given before the end of this month.

The facility, which will take 24-30 months to set up, is expected on stream in March 1998. The engineering contractor and technology licensor will be Kellogg. The facility, designed by Kellogg, was bought second hand from Sri Lanka.

The Phosphate Fertiliser Project

The first ever rock phosphate project, based on apatite deposits at Eppawela, was the most controversial project that I ever handled in my career. The project proper, including the design and construction of the processing facility was a product of my own, and eventually became (to borrow Hoffman’s expression) - “my problem child”, and as such, it was carefully nurtured it.

Apatite deposit

My professional colleagues, with the exception of Willie Herath, tore me to pieces, yet I emerged unscathed, having accomplished my task. The apatite deposit ‘discovered’ by Geological Survey’ as projected in the original plan, was to have proceeded beyond the rock phosphate stage towards the manufacture of soluble phosphates, (DAP, MAP Single super, Triple super phosphate etc) but was not to be. (ref. Fertilizer panel - proposals, Ministry of Planning and Economic Affairs).

The subsequent phase of the phosphate development programme was to set up a plant to manufacture soluble phosphates.

The project launched by a US Company, came to a premature end, and numerous other projects centred round the deposit were abandoned, due to pressure brought about by misguided youth, stage managed by a few NGOs based in Colombo.

This led to the censure of Sri Lanka as an unreliable platform for U. S. investments (see. U. S. Dept of Commerce official communiques on the subject), was little known. The apathy shown by US investors persisted for years that followed.

The writer is Former Deputy Director, Ministry of Planning and Economic Affairs