Dom-at of TheWorld Bank

FOR OMCIL USEONLY Public Disclosure Authorized

ReportNo. 6297. Public Disclosure Authorized

PROJECTCOMPLETION REPORT

INDIA - INDUSTRYCREDIT

(CREDIT 598-IN)

June 23, 1986 Public Disclosure Authorized Public Disclosure Authorized

IndustryDepartment

Thisdocument has a restricteddisttibution and may be used by recipientsonly in the performance of teit officl duties.Its contents maynot otherwisebe disclosedwithout World Bank authorization. FOREIGNEXCHANGE RATES

Mo/Year

Appraisal 04/75 US$1 - Rupees 7.85 Board Approval 12/75 US$1 - Rupees 7.80 Credit Closing 12/82 US$1 = Rupees 9.70 ProjectCompletion Report 02/86 US$1 - Rupees 12.50

FISCALYEAR

April 1 - March 31

ABBREVIATIONS

ASC - AdministrativeStaff Collegeof ,Hyderabad CFL - Coromandel Ltd. DOA - Department of Agriculture FCI - Fertilizer Corporation of India GOI - GSFC - Gujarat State Fertilizers Ltd. HFC - HindustanFertilizers Corporations Ltd. HPCL - Corp. HSC - Hindustan Steel Corporation Ltd. IDBI - IndustrialDevelopment IPFCO - IndianFarmers' Fertilizers Cooperative Ltd. MFL - Ltd. NCAER - NationalCouncil of AppliedEconomic Research NFL - National Fertilizers Ltd. NLC - Neyveli Lignite Corp. PDIL - Planningand DevelopmentIndia Ltd. RCF - RashtriyaChemicals & FertilizersLtd. RITES - RailwayInvestigation Transport Engineering Services SAIL - Steel Authorityof India,Rourkela (the new name of HSC) SPIC - SouthernPetrochemical Industries Corp. ZAC - Zuari Agrochemicals Ltd. FOROFFCIAL USE ONLY THEWORLD SANK Washington,D.C. 20433 U.S.A.

OIiceof Dirctor-Cetal Opeations Vu4ut

June 23, 1986

MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

SUBJECT: Project Completion Report: India - Fertilizer Industry Credit (Credit 598-IN)

Attached, for information, is a copy of a report entitled "Project Completion Report: India - Fertilizer Industry Credit (Credit 598-IN)" prepared by the Industry Department. Under the modified system for project performance auditing, further evaluation of this project by the Operations Evaluation Department has not been made.

Yves Rovani

By Otto Maiss

Attachment

This document has a restricted distribution and may be used by recipients only in the performance of their officialduties. Its contents maynot otherwise be disclosed without World Bank authorization. FOROFFICIAL USE ONLY

PROJECTCOMPLETION REPORT

INDIA-FERTILIZERINDUSTRY CREDIT (CREDIT598-IN)

TABLE OF CONTENTS

Page No.

PREFACE ...... , ...... i BASIC DATA SHEET ...... ii HIGHLIGHTS v

Io INTRODUCTION...... 1

II. PROJECTBACKGROUND ...... I

A. ProjectOrigin, Preparation, Appraisal, Approval and CreditEffectiveness ...... 1 B. ProjectDescription and Objectives 2 C. ProjectScope Revision 4 D. SubprojectsCharacteristics 5 Ea ProjectCost ...... 6 F *Credit Allocation 8 G. Sub-borrowersCharacteristics ...... 8

III.PROJECT IMPLEMENTATION AND MANAGEMENT ...... 9

A. Achievementof ProjectObjectives ..... 9 B. ProjectManagement ...... 10 C. TechnicalAssistance and Training.... 11 D. Use and Performanceof EngineeringContractors 11 E. Transferof Technology ...... 12 F. Procurementand Performanceof Suppliers 12 G. ImplementationSchedule 12

IV. OPERATINGPERFORMANCE ...... 13

A. Commissioningand Start-up 13 B. Productionand CapacityUtilization 13

V. FINANCIALPERFORMANCE ...... 14

A. FinancialRates of Return 14 B. FinancialPerformance 15

VI. SECTORALAND ECONOMIC PERFORMANCE...... 17

A. EconomicRates of Return 17 B. Stabilityof FertilizerSupply ...... 0...40000...... 17 C. EnvironmentalAspects 18

This documenthas a restricteddistribution and may be used by recipientsonly in the performance of their officialduties. Its contents may not otherwisebe disclosedwithout World Bank authorization. TABLE OF CONTENTS (Cont'd)

Page No.

VII. ASSOCIATION PERFORMANCE ...... 18

VIII. LESSONS LEARNED ...... 19

ANNEXES

2-1 Revision of Project Scope ...... 21 2-2 Project Cost and Credit Allocation ...... 22 2-3 Production Trends of India's Fertilizer Plants, 1981/82-1984/85... 23

3-1 DisbursementSchedule for the Credit... o...... 24

5-1 Retention Price Formula * *** ... ***...... *...... 25 5-2 Financial and Economic Rates of Return for Select*O Subprojects .. 26 5-3 Summary of FinancialInformation for Selected Sub-borrower's...... 27

6-1 Historical Consumption, Production, and Import of Fertilizers in India, 1983/84 ...... 28 - i -

PROJECTCOMPLETION REPORT

INDIA-FERTILIZERINDUSTRY CREDIT (CREDIT 598-IN)

PREFACE

1. The Associationapproved a creditof US$105.0million equivalent (Credit598-IN) on December31, 1975 to the Governmentof India (GOI) to assist India'sfertilizer industry to modernizeits existingproduction facilities,eliminate bottlenecks in prodtuction,improve pollution control systems,and installenergy-efficient equipment. Under the Credit, thirty-sixsubprojects have been implementedby 13 subborrowersin the public,private and joint sectors,accounting for 65% of India'sfertilizer manufactiprers.The Creditwas onlent to beneficiaries,partly through the IndustrialDevelopment Bank of India (IDBI)with funds earmarked. In addition,GOI sponsoredthree fertilizerindustry related studies under technicalassistance.

2. The Projectwas designedas a pilot projectof a new type of programlending which is tailoredfor a specificindustry with a number of firm subprojectcomponents. As comparedwith traditionalprogram or sector loans whose subprojectcontents were selectedand implementedunder the initiativeof governments,the Projectwas designedto enablethe Associationto establishdirect relationshipswith subprojectexecuting entities. Therefore,all the subprojectsunder the Projectwere appraised individuallyby the Associationmission during appraisal, and includedin the Projectscope as firm components. In the courseof Projectimplementa- tion, however,the originalconcept of the Projectproved to be difficult to manage,as most of the subprojectswere droppedand had to be replaced by otherswith similarobjectives. Out of nineteenoriginal subprojects, nine were droppedand replacedby twenty-sixnew subprojects.Against this background,this ProjectCompletion Report (PCR) has been preparedpartly followingthe line used in preparingthe PCR for DevelopmentFinance Corporation(DFC) projectswithin the basic frameworkused for normal industrialprojects.

3. In accordance with the revised projectperformance reporting procedures this report has been read in the Operations EvaluationDepartment (OED) but the projectwas not auditedby OED staff. The draft Completion Reportwas sent to the Borrowerfor comments;however, none were received. - ii -

PROJECTCOMPLETION REPORT

INDIA-FERTILIZERINDUSTRY CREDIT (CREDIT598-IN)

BASIC DATA SHEET

KEY PROJECTDATA

Appraisal Actual and Item Estimate Final Estimates

ProjectCost (US$ million) 238.7 169.2

Cost Underrun or Overrun (%) - 29.1

Number of Subprojects 22 a/ 39 a/

Credit Amount (US$ million)

Disbursement 105.0 101.9 Cancelled - 3.1

Project Cost and Credit Allocation by Sub-borrower

Credit Project Credit Project Allocation Cost Allocation

FCI ) ) 3.4 2.2 RCF ) ) 19.9 13.0 HFC ) 79.0 ) 38.5 b/ c/ 35.4 20.9 NFL ) ) 4.5 3.4 PDIL ) ) 0.4 0.4 NLC 19.5 12.0 21.1 10.9 HSC (SAIL) 26.1 15.5 22.2 16.2 GSFC d/ 20.6 9.0 17.1 4.5 SPIC d/ 46.2 14.0 12.3 8.1 HPCL 25.9 4.0 - - ZAC d/ 10.2 6.0 13.6 10.5 CFL e/ 8.5 4.0 3.1 1.7 MFL e/ 1.7 1.0 0.8 0.5 IFFCO d/ - - 17.1 10.2 DOA 1.0 1.0 0.4 0.4 Total 238.7 105.0 169.2 101.9 a/ Three fertilizerrelated studies are included. b/ This amountwas allocatedto FCI before its restructuringinto five companies. c/ Equipmentprocured by PDIL, which was FCI's engineeringdepartment prior to its restructuring,has been allocatedto other operating companies. d/ Credit proceedswere onlent to these subborrowersthrough IDBI. e/ Creditproceeds were sold by the Borrowerto these two companies. - iii -

CumulativeIDA Loan Disbursement

FY76 FY77 FY78 FY79 FY80 FY81 FY82 FY83 l ~~~~ Appraisal Estimate 13.6 34.6 84.0 105.0 - - - - Actual 1.0 7.5 18.0 35.9 60.0 83.6 96.9 101.9

StabilizedCapacity Utilization of Major Plantsunder the Project(%)

After Projecta/ Company Plant BeforeProject Appraisal Actual

FCI 54 80 59 RCF 76 80 89 PhosphoricAcid 61 80 78 HFC Urea 38 80 37 NLC Urea 56 80 76 SAIL CalciumAmmonium Nitrate 39 80 34 GSFC Urea 72 80 86 PhosphoricAcid 55 80 86 SPIC Ammonium/Urea 73 80 96 CFL Ammonia/Urea 76 80 84 ZAC Ammonia/Urea 87 80 89 IFFCO Ammonia 92 N/A 95

Appraisal Estimate Actual

FinancialRate of Return (Z) 14-60% 2-12%

EconomicRate of Return (%) 18- 100% 12-100%

OTHER DATA

FirstMention in Files 09/74 PreappraisalMission 01/75 AppraisalMission 04/75 Negotiations 11/75 Board ApprovalDate 11/16/75 Loan SignatureDate 12/31/75 EffectivenessDate 03/01/76 OriginalClosing Date 06/30/80 ActualClosing Date 12/31/82 Borrower GOI ExecutingAgency 13 FertilizerCompanies and GOI

a/ Averagecapacity utilization for four years after the Project. - iv -

MISSION DATA Mission Mo/Yr. No. of Weeks Persons Report Date Identification }1/74 1/2 1 Preparation/ 12/05/74 Preappraisal 01/75 3 7 02/07/75 Appraisal 04/75 3 4 05/23/75 Supervision 05/76 2 4 05/25/76 Supervision 11/76 3 2 12/10/76 Problem Project Brief 03/77 - - 03/24/77 Supervision 07/77 2 2 08/09/77 Supervision 11/77 1 1 01/04/78 Supervision 03/79 1/2 1 05/29/79 Supervision 12/80 1/2 Supervision 1 02/03/81 - 1 07/12/82 PROJECTCOMPLETION REPORT

INDIA-FERTILIZERINDUSTRY CREDIT (CREDIT598-IN)

HIGHLIGHTS

1. In mid-1970,India's fertilizer industry operated at a level of capacityutilization below 60%, mainlydue to bottlenecksin ntilities supply, the use of old technologyand processdesign faults. The Project was aimed at assistingIndia to remove the variousobstacles to efficient operationof the fertilizerindustry. The subprojectsimplemented under the Projectinclude plant modifications,establishment of additional storagefacilities, installation of captivepowvr and energysaving equipment,and improvementof pollutioncontrol and testingfacilities (paras.1.01, 2.04-2.08). 2, The Projectachieved most of its originalobjectives successfully.Rehabilitation/debottlenecking subprojects have contributed to an overallincrease in capacityutilization at most of the existing productionfacilities, as anticipatedat appraisal. After the Project, capacityutilization of the subprojectentities, except for three companies which sufferedfrom other unanticipatedbottlenecks such as region-wide electricityinterruptions, has increasedsubstantially. The industry-wide capacityutilization has reached74% for nitrogenousplants and 89% for phosphaticplants by 1984/85as comparedwith the low level of helow 60% in the mid-1970s(para. 3.01).

3. Besidesthe improvementin capacityutilization, the Projectalso contributedto the upgradingof the industry'smanagement efficiency and financialsituation. FollowingIDA's recommendation,the giant public sector company,Fertilizer Corporation of India (FCI),which had been operatingseveral large scale fertilizerplants throughoutIndia with inadequatemanagement controls, was restructuredinto five smallerand more manageableregional corporations. Also, fertilizerprices which stayedat an extremelylow level in the mid-1970s,not sufficientfor even efficientfertilizer manufacturers to generatepositive cash flow,were substantiallyraised to allow efficientfertilizer manufacturers to become financiallysound. The retentionprice formula,which was Introducedin 1977 at IDA's recommendation,was designedto enableefficient operators to realizea 12% after tax returnon investments(paras. 7.03-7.04).

4. Even thoughthe Projecthas ultimatelyachieved most of its originalobjectives, it encounteredconsiderable difficulties in implementation.The Projectscope changedsubstantially several times: nine subprojectsin the originalsubproject list of 19 were droppedand replacedby 26 other subprojects;the Projectwas completed52 months behindoriginal schedule; and a portionof the credit (US$3.1million out of US$105million) had to be cancelledbecause GOI could not preparein time the needed replacementsubprojects (paras. 3.11-3.13). - vi -

5. From the problemsexperienced in Projectimplementation, three major valuablelessons have been learned. One lessonwas that a project involvingvarious types of small subprojectsby a numberof entitiesshould be coordinatedby a centralunit within the countrycharged with the responsibilityfor monitoringand coordinatingthe Project,preferably at the governmentlevel. Even thoughthis was envisagedin the Project,it was not put into effect. The other lessonwas that the Projectshould have been designedto includea smallernumber of relativelylarge subprojects if the originalapproach were to be workable. Anotherlesson was that a project involvinga number of subprojectentities requires a good progress and completionreporting system using a etandardizedformat and content. Due to the inefficientreporting system, the Ministryof ChemicalIndustry could not consolidatethe subprojectdata and prepareits draft Project CompletionReport (PCR) (paras.8.01-8.04). - I.-

PROJECT COMPLETION REPORT

INDIA-FERTILIZERINDUSTRY CREDIT (CREDIT598-IN)

I, INTR0DUCTION

1.01 The dramaticfertilizer price increasein the early 1970s hit fertilizerimporting countries, including India, presenting a major threat to the exploitationof the full potentialof high yieldingvarieties, and thus the food self-sufficiencyprograms of these countries. In 1974/75 India was importing48% of its total nitrogen (N) fertilizerrequirements, 52% of its phosphate(P) consumption,and 100% of potash(K) requirements. Fertilizerimports had been far bigger than previouslyexpected mainly becauseactual domestic production had fallenshort of expectationsdue to low capacityutilization of installedfertilizer capacity. Major reasons for the low capacityutilization were: (i) use of old technologies;(ii) processdesign faults;(iii) shortageof electricpower and other utilities;(iv) shortageof raw materials;(v) management/laborproblems; (vi) financinggaps; and (vii) technicallimitations. Because of these constraints,the targetof reducingits dependenceon importsdown to 30% during the Fifth Five-YearPlan (1974/75-1978/79)appeared difficult to achieve.

1.02 Againstthis background,India preparedan investmentprogram in collaborationwith the Associationaimed at expansionof its domestic fertilizerproduction base by enhancingthe capacityutilization of existingfacilities through rehabilitation/debottlenecking. At GOI's request,IDA providedassistance to implementthe program. Under the Projectthirty-five subprojects have been implemriatedto modernize technology,eliminate bottlenecks, improve efficiency of energyuse and reduce the level of pollutingeffluents. The Projectwas initiatedin September1974, appraisedin April 1975, approvedby the Board in November 1975, and completedin April 1984, 52 months behind schedule.

II. PROJECTBACKGROUND

A. ProjectOrigin, Preparation, Appraisal, Approval and Credit Effectiveness

2.01 Since 1967 the Associationhad been involvedin the Indian fertilizersector by financingthe establishmentof severalgrassroot fertilizerproduction facilities in India. To meet the increasingneeds of the agriculturesector, GOI initiateda programin 1974 to expanddomestic fertilizerproduction under the Fifth Five-YearPlan. The program consistedof two parts: (i) expansionof grassrootfertilizer production capacities;and (ii) improvementof capacityutilization of existingplants which then were operatingat below 60% of their designedcapacities. In September1974, GOI reviewedthe possibilityof Bank Group assistancein - 2 - implementingthe latterpart of the programin a meetingwith a Bank missionthen visitingIndia, and subsequentlyrequested an IDA creditof US$105million for its financing. Followingan identificationmission in November1974 to assist in the preparationof subprojectsto be implemented under the Project,a preappraisalmission visited India in January 1975, agreedwith GOI on the projectscope, capitalcost estimates,and IDA role. The Projectwas appraisedin April/May1975. The IDA Creditwas negotiatedand approvedby the Board of the Associationin November1975. It becameeffective on March 1, 1976.

2.02 The subprojectsin the originallist of the Projectwere selected after detaileddiscussions with the concernedfertilizer companies and reviewwith GOI to ensure their quick implementation.However, the subprojectapproval procedures within the companiesand in the Government took a long time. In the process,almost half of the originalsubprojects were droppedand replacedwith othershaving similar objectives. Because of substantialdelays in the start of implementation,a ProblemProject Brief was preparedin March 1977 delineatingthe problemsfacing the Project. The contentsof subprojectswere revisedseveral times in order to substituteproblem subprojects with new ones. As a result,the completiondate of the Projectwhich was originallyset for December 31, 1979 was postponedthree times, The cumulativedelay in Project implementationwas 52 months.

2.03 The Credit was made to GOI on standardIDA terms. About two-thirdsof the Credit (US$67.0million equivalent) was onlent by GOI directlyto publicsector companies;and the remainingone-third (US$33.3 millionequivalent) onlent to privatesector companies through the I.ndustrialDevelopment Bank of India (IDBI). The balanceof Credit proceeds(US$2.2 million equivalent) was sold by the Borrowerto two companiesat the prevailingexchange rates.

B. ProjectDescription and Objectives

2.04 The objectivesof the Credit were to: (i) assist in removing variouslimitations facing the Indianfertilizer industry and thereby raise productionin the existingfacilities from the then industry-wide averagelevel of less than 60% to about 80-90% capacityutilization; (ii) help severalcompanies install pollution control facilities consistent with the agreedenvironmental standards; and (iii) providetechnical assistance to facilitatefertilizer sector planningat the Governmentlevel.

2.05 Projectcomponents were selectedafter reviewingthe needs of the Indianfertilizer industry with the Ministryof Petroleumand Chemicals (MPC) and the fertilizerproducing companies. Nineteenoriginal subprojectswere selectedto be carriedout by nine companies;three fertilizersector studies were includedto help GOI in its sectorplanning.

2.06 The originalsubprojects under the Project,and their respective sponsorsand objectives are summarizedbelow: - 3 -

OriginalProject Sponsors and Subprojects

Subproject Sponsor Subproject Objective

1. FertilizerCorporation - Boiler/powerset Reductionof the plant's of India (FCI) at Gorakhpur dependenceon outside power supply

- Boiler/powerset at Durgapur

- Boiler at Trombay Additionalsteam generation - Ammoniatank wagons Increasein operational and storageat stability Trombay

- Pollutioncontrol Environmentalprotection and testingequip- ments

2. NeyveliLignite - Feedftockconver- Conversionof feedstock Corpration(NLC) sion from ligniteto fuel oil

3. HindustanSteel - Feedstockconver- Conversionfrom coke gas Corporation(HSC) sion to naphtha

4. GujaratState - Purge gas recovery Energy efficiency FertilizerCorp. (GSFC) - FluorineRecovery Recoveryof fluorine from gaseouseffluent - Phosphoricacid plant modernization plant debottle- necking

5. HindustanPetroleum - Refinerydebottle- Expansionof production Corp. (HPCL) necking capacity

6. MadrasFertilizers Ltd. - Urea debottleneck-Plant modernization (MFL) ing - Ammoniaprocess Processcomputerization controlunit

7. SouthernPetrochemical - Fluorinerecovery Recoveryof fluorine IndustriesCorp. (SPIC) from effluent - Soda ash plant Conversionof excess ammonia

8. CoromandelFertilizers - Boiler/powerset Increasein reliability Ltd. (CFL) of power supply - Fluorinerecovery For plannedaluminum fluorideplant - 4 -

9. Zuari Agro Chemicals - Ammoniaplant Plant modernization (ZAC) debottlenecking - Urea plant pollu- " tion control

10.GOI (technicalAssistance) - VariousFertilizer Study on Fertilizer RelatedStudies demand projections, distribution,and transportation.

C. ProjectScope Revision

2.07 The Projectscope was substantiallyrevised four times as shown in Annex 2-1, and summarizedbelow.

ProjectScope Change in Subprojectsa/

1st 2nd 3rd 4th Original Revision Revision Revision Revision (Dec. 1975) (Mar. 1978)(Jan.1980)(Jun. 1980)(April 1981)

Additionof New Subprojects 19 17 5 1 4

Drop of Subprojects - 9 1 - -

Total Numberof Subprojects 19 27 31 32 36 = _ _ =

Numberof Sub-borrowers 9 7 13b/ 13 13

Number of Plants involved 11 14 15 15 15

a/ Excludingthree study componentsunder technicalassistance. b/ FCT has been restructuredinto five companies.

Althoughthe Projectwas originallyto includenineteen firm subproject componentsappraised individually as normal industrialprojects, the companiesdecided not to proceedwith severalof them and they were replacedby a number of smallersubprojects with similarobjectives. Out of the nineteenoriginal subprojects 1 /, nine subprojectswere dropped and replacedby twenty-sixothers.

1/ Three studiesunder technicalassistance are excludedhereafter unless otherwiseindicated when subprojectsare mentioned. 2.08 There were three major reasonsfor the cancellationof 9 of the originalsubprojects. First,four originalsubprojects were droppeddue to governmentdecisions. Three plannedflourine recovery subprojects were droppedby the sponsors(GSFC, SPIC, CFL) in light of the GOI decisionthat these subprojectsshould be based on commerciallyunproven Indian technologyrather than the internationally-availableand proven technology. The HPCL's refinerydebottlenecking subproject was droppedin view of the proposednew Mathurarefinery which was to be establishedin the same marketingarea. Second,financial constraints led to the cancellationof a chlorine/sodaash subprojectsponsored by SPIC. This sub-projectwas subsequentlyimplemented without Bank Group financing. As its financialsituation improved, SPIC implementedthree other smaller subprojectslater. Third, two other companiesvoluntarily decided not to proceedwith their subprojectsfor technicaland economicreasons. Ammonia processcontrol (MIC) and boiler (FCI)were cancelledvoluntarily by the subprojectentities. Replacementsubprojects were provided,reviewed and acceptedby the Association.

D. SubprojectsCharacteristics

2.09 The thirty-ninesubprojects implemented are groupedinto four main categories:(i) fertilizercapacity expansion and processefficiency improvementsincluding plant modification/rehabilitationand additional storageof intermediateproduct; (ii) capturepower and utilities;(iii) pollutioncontrol and testingequipment; and (iv) fertilizerrelated studies. The table below comparesthe originalsubprojects with the ones actuallyimplemented.

Characteristicsof Subprojects

Category At Appraisal Actual

A. Fer.ilizerExpansion and ProcessEfficiency Improvement

1. Plant Phosphoricacid plant Phosphoricacid plant Rehabilitation debottlenecking(GSFC), debottlenecking(RCF, Refinerydebottlenecking GSFC), ANP plant rehab- (HPCL),u'rea debottle- ilitation(RCF), necking,Ammonia process ammonia/ureaplant control(MFL), Ammonia modification(MFL, HFC, debottlenecking(ZAC). SPIC, IFFCO).

2. Feedstock Feedstockconversion Feedstockconversion Conversion (NLC, SAIL) (RCF, NLC, SAIL)

3. Waste Recovery Purge gas recovery Purge gas recovery (GSFC)fluorine (GSFC,SPIC, IFFCO) recovery(GSFC, SPIC, CFL) - 6 -

4. Additional Ammonia storage and Ammonia sc.6rge (FCI, Storage/Transport tank wagons (RCF) HFC, NFL, SPIC, IPFCO), ammonia tank wagons (HFC, NFL)

5. New Plant Soda ash/ammonium None chloride Plant (SPIC)

B. Captive Power and Utilities

1. Captive Power/ Boiler/power set (FCI, Boiler/power set (RCF, Utilities RCF, CFL) HFC, CFL)

C. Pollution Control and Testing Equipment

1. Pollution Control Pollution Control Pollution control (RCF, (RCF, MFL, ZAC) MFL, ZAC, IFFCO)

2. Testing Equipment Non-destructive testing Non-destructive testing equipment (PDIL) equipment (PDIL)

D. Fertilizer-Related Studies

Technical Three studies (DOA) Three studies (DOA) Assistance

E. Project Cost

2.10 The Project costs, both the appraisal estimates and the actuals, for each subproject are given in Annex 2-2, and summarized below:

Comparison of Projects Costs - Appraisal Estimate vs. Actual

Appraisal Estimate _ Actual Number of Amount Number of Amount Subproject (US$ million) % Subproject (USS million) %

FCI 5 79.0 33.1 1 3.4 2.0 RCF - - - 5 19.9 11.8 HFC - - - 8 35.4 20.9 NFL - - - 2 4.5 2.7 PDIL - - - 1 1.1 0.7 NLC 1 19.5 8.2 1 21.2 12.5 SAIL 1 26.1 10.9 1 22.4 13.2 MFL I 2 1.7 0.7 1 0.8 0.5 GSFC 3 20.6 8.6 2 17.1 10,1 SPIC 2 46.2 19.4 4 9.2 5.4 HPCL 1 25.9 10.9 - - - ZAC 2 10.2 4.3 3 13.6 8.0 CFL 2 8.5 3.6 1 3.1 1.8 IFFCO - - - 6 17.1 10.1 DOA 3 1.0 0.4 3 0.4 0.2 IT 38.7 100.0 39 169.2 100.0 -7-

Due to the major scope change,a comparisonof the actual costs for the whole projectwith the appraisalestimates is not meaningful. Overall Projectcosts were lower than appraisalestimates by 29%, mainly due to cancellationof subprojectswhich would have requiredhigher local cost components. The actual capitalcosts for most of the originalsubprojects, which accountedfor about 62% of the total projectcosts, were slightly lower than appraisalestimates as shown in Annex 2-2. The actual costs for the 10 originalsubprojects which were implementedwere US$104.3million, about 7.2% lower than the appraisalestimate of US$112.4million. The main reasonfor cost underrunfor these componentswas the rapid devaluationof local currencyduring their implementation,resulting in the reductionof local costs in U.S. dollarterms.

2.11 Actual capitalcosts for the whole Projectare comparedwith the appraisalestimates by type of subprojectsin the table below.

2titalonts !X 3eof afltoeots (inU$ mULio

A-pEpnl Actul SIfrsiNns &ter MM&ctus Loca FonAgnia% % i*pngeMsloca FonggEalhbb X

1. &quEfgxwFb$1Hker& ftoos *capak EfIctAvLy]irbwot 10 79.7 67.6 147.361.7 29 55.9 79.5 135.4805 2. ntm a Gmsi & tWIties 4 31.1 29.8 60.1 25.2 3 9.9 19.1 29.0 17.2

3. Ati-Pollutim 4 1.0 3.4 4.4 1.8 3 0.6 2.9 3.5 2.1

4.1sf1ny Bqtpmm 1 21.9 4.0 25.9 10.9 - - - - -

5. gf2ties txxdTadmical Asssts=a 3 - 1.0 1.0 0.4 3 - 0.4 0.4 0.2

6. Tat±al 22 L13.7 105.0 238.7 1.O 38 66.4 101.9 16&3 100.

E/ EdiduigInxect foxrii exiw os.

Actual proportionsof Projectcosts for each type of subprojectchanged significantlyfrom the appraisalestimates, reflecting the major changesin the scope of the Project. The portionof fertilizercapacity expansion and - 8 - processefficiency improvement subprojects substantially increased to accountfor 81% of the total Projectcapital costs as comparedto an appraisalestimate of 62%.

F. CreditAllocation

2.12 The proceedsof the Credit were originallyallocated to twenty- two subprojects(including the three sector relatedstudies sponsored by the Departmentof Agriculture(DOA)) to be carriedout by fourteen executingagencies. As the Projectscope changed,the Credit prn'eedswere reallocatedto thirty-ninesubprojects accordingly. As FCI, the single largestoriginal sub-borrower, was reorganizedinto five smallercompanies, the proceedswere reallocated.The followingtable summarizesthe allocationof the Creditat appraisaland the actualresults.

CreditAllocation (in US$ millionunless otherwise mentioned)

AppraisalEstimate Actual Number of Number of ExecutingAgency Subprojects Amount % Subprojects Amount %

FCI a/ 5 38.5 36.7 1 2.2 2.2 RCF - - - 5 13.0 12.8 HFC - - - 8 20.9 20.5 NFL - - - 2 3.4 3.3 PDIL - - - 1 1.1 1.1 NLC 1 12.0 11.4 1 10.9 10.7 SAIL 1 15.5 14.8 1 16.2 15.9 MFL 2 1.0 1.0 1 0.5 0.5 GSFC 3 9.0 8.6 2 4.5 4.5 SPIC I 2 14.0 14.2 4 6.4 6.3 HPCL 1 4.0 3.8 - - - ZAC 2 6.0 5.7 3 10.5 10.3 CFL 2 4.0 3.8 1 1.7 1.7 IFFCO - - - 6 10.2 10.0 DOA 3 1.0 1.0 3 0.4 0.4 Total 21 105.0 100.0 39 101.9 100.0

a/ FCI was split into five smallercompanies: FCI, HFC, RCF, NFL, and PDIL. b/ US$3.1million has been cancelled.

G. Sub-borrowerCharacteristics

2.13 As of March 31, 1985, twenty-onefertilizer production companies, includingeight publicsector companies, operate in the Indian fertilizer industry. Feedstock,product, production capacity, and recentproduction - 9 - performanceof these companiesare detailedin Annex 2-3. As of March 1985, the fertilizerplants operated by the thirteenbeneficiaries of the Credit accountedfor approximately74% of the nation'stotal capacity. The number of plants,major products,feedstock, and productioncapacity of these companiesare summarizedas follows.

Characteristicsof SubprojectSponsor

Design Number Major Capacity Company Plants Products Feedstock ('000 tpy)

A. PublicSector

FCI 4 Urea, AS Naphtha,Fuel 806 RCF 1 Urea, NP, ANP NaturalGas 317 HFC 3 Urea, AS Naphtha,Natural Gas 349 NFL 3 Urea, CAN Fuel Oil 705 NLC I Urea Fuel Oil 70 SAIL 6 CAN/AS Coke, Naphtha 144 NFL 1 Urea, NP, NPK Naphtha 176

B. PrivateSector

-SFC 1 Urea, AS, DAP NaturalGas, Naphtha 236 SPIC 1 Urea, NP, NPK Naphtha 258 ZAC 1 Urea Naphtha 171 CFL 1 Urea, NP, NPK Naphtha 84

C. Cooperative

IFFCO 2 Urea, NP, NPK NaturalGas, Naphtha 488

III. PROJECTIMPLEMENTATION AND MANAGEMENT

A. Achievementof ProjectObjectives

3.01 Althoughcompletion of the Projectwas delayedand the agreed Projectscope was substantiallyrevised, the Projectachieved its original objectivesto a large extent. All the subprojects,except for three nitrogenousfertilizer plants which are currentlyfaced with unexpected constraints(FCI, HFC and SAIL),resulted in increasedcapacity utilization of the existingfacilities, efficient energy consumption,and environmental protection. FCI, HFC and SAIL could also have fully achievedtheir objectivesif there had not been unexpectedinterruptions such as power shortagein theirrespective regions. As a resultof the implementationof the subprojects,the industry-widecapacity utilization has increasedfrom - 10 - the level of below 60% in the early 1970s to the currentlevel of 74% in nitrogenand 89X in phosphates. Increasesin capacityutilization after the Project for major beneficiariesof the Creditare depictedbelow:

CapacityUtilization Before and After the Project (%- After Project Before Appraisal Company Plants Projecta/ Estimate Actual'J/

FCI Urea 54 80 59d/ RCF Ammonia 76 80 89 PhosphoricAcid 61 80 78 HFC Urea 38 80 38e/ NFL Urea 73 80 80 NLC Urea c/ 56 80 76 SAIL Ammonia/CAN 39 80 34 d/ MPL; Urea 79 80 79 GSFC Urea 72 80 86 PhosphoricAcid 55 80 86 SPIC Ammonia/Urea 73 80 96 ZAC Ammonia/Urea 80 80 89 CFL Ammonia/Urea 76 80 84 IFFCO Ammonia/Urea 92 - 95 a/ Capacityutilization before the subprojectwas launched. D/ Averagecapacity utilization for four years after the Project. -/ Capacityexpansion was undertakenduring Project implementation. d/ Due to region-wideelectricity interruptions, the facillitieshave not been able to fully exploit their capacities. e/ HFC has been faced with shortageof feedstock.

3.02 In additionto increasesin capacityutilization, another major achievementwas reductionof materialsconsumption per ton of output. Conversionto cheaperand more economicalfeedstock and installationof cost-savingequipment entailed reduction in raw materialsconsumption and other inputsper unit of production. Given the shortageof fertilizersin India the savingsin raw materialswere directlyutilized to increase fertilizerproduction.

B. ProjectManagement

3.03 The subprojectsunder the Projectwere implementedand managedby each sponsorwith minimumcoordination of centralizedproject management at the Governmentlevel. At each companylevel, most of the technology- orientedsubprojects were carriedout by reputedengineering firms on a turnkeyor semi-turnkeybasis, limitingthe need for local management. - 11 -

Worldwidereputed foreign firms were more activelyinvolved In the techno- logy-intensivesubprojects such as plant rehabilitation/debottlenecking.

3.04 Most of the originalsubprojects underwent delays in initiation of their implementaiondue to delayedproject initiation, government approvals,financial difficulties, or technicalarguments, resulting in the cancellationof severalsubprojects. In accordancewith GOI's responsibi- litiesstipulated in the CreditAgreement, the Ministryof Petroleumand Chemicals(MPC) was supposedto monitor the implementationof the subprojects,provide assistance to the subborrowersin obtelningnecessary Governmentapprovals, and coordinatewith other relatedministries, includingthe Departmentof EconomicAffairs (DEA). However,in the absenceof effectiveproject monitoring at the Governmentlevel, i.e., centralizedproject management, Project implementation was poorlymonitored and coordinated,thus leadingto substantialdelays in Projectcompletion and materialchanges in Projectscope.

C. TechnicalAssistance and TraininRg

3.05 Three fertilizersector related studies were sponsoredby the Department:of Agriculture(bOA) and undertakenby local researchinstitutes under the Project. These are: (i) FertilizerDemand ProjectionsStudy carriedout by the NationalCouncil of AppliedEconomic Research (NCAER); (ii) FertilizerTransportation Study by the RailwayInvestigation Transport EngineeringServices (RITES); and the FertilizerStorage Study undertaken by the AdministrativeStaff Collegeof India (ASC). The resultsof these studieswere subsequently,used by the Governmentin drawingup fertilizer sectordevelopment stratekgies.

3.06 Local technicalstaff monitoredthe implementationof subprojects,even the ones implementedby foreigncontractors on a turnkey and semi-turnkeybasis. After the mechanicalcompletion, the contractors trainedthe local staff. PDIL also undertooktraining sessions for the use of testingequipment procured centrally by PDIL for the subproject sponsors.

D. Use and Performanceof EngineeringContractors and Consultants

3.07 Whereverlocal expertisewas not available,foreign consultants were used in the implementationof subprojects,particularly for revamping/modernizingof the older facilitieswhich requiredspecialized technology.Generally, contracts involving foreign participation fell to the originaldesigners of the plants. These foreignfirms implementedsome of the subprojectson a turnkeybasis and providedconsultancy services for severalother subprojectswhich were carriedout mainly by in-house technicalpersonnel of the subprojectsponsors. The qualityof technology providedby these firms was satisfactoryand has not causedany issueswith the subprojectsponsors.

3.08 Local engineeringfirms also participatedin the implementation of subprojectswherever proper local expertiseexisted. Apart from local contractorswhich were mainly chargedwith installationand construction, - 12 - some local engineeringfirms obtainedturnkey contracts for several subprojects. The qualityof local engineeringfirms was also satisfactory.For example,PDIL implementedNLC's feedstockconversion subprojectsuccessfully and timelyon a turnkeybasis.

E. Transferof Technology

3.09 Local firms,including subproject sponsors, directly managed the implementationof subprojectsas far as local technologypermitted with technicalassistance from foreignconsultants. In the course of Project implementation,local firms easilyobtained necessary technology because foreignconsultants, most of whom were the originaldesigners of the plants,were competingfor the rapidlygrowing market in India. While with the turnkeycontracts, particularly in the case of rehabilitation/debottle- neckingsubprojects, the transferof engineeringtechnology had been limited,the experienceobtained from these subprojectshas, on the whole, been substantialand has been well utilizedfor the improvementof other plantswith similarproblems not includedin the Project.

F. Procurementand Performanceof Suppliers

3.10 Procurementfor the subprojectswas carriedout followingthe Bank'sprocurement guidelines with no significantproblems impacting on projectimplementation.' Due to the natureof the subprojects,the average size of the bid packageswas relativelysmall and the share of proprietary items not appropriatefor internationalcompetitive bidding (ICB)was somewhatlarge. Where appropriate,components of some subprojectswere awardedto contractors,both foreignand local,on a turnkeybasis followingICB procedures. Adequateinternational competition and good responseto bid invitationswere availableunder ICB and contractswere awardedto technicallyacceptable suppliers at competitiveprices and with appropriatelocal preference. On an overallbasis the suppliersand the contractorsperformed satisfactorily delivering technically satisfactory productson time.

G. ImplementationSchedule

3.11 At appraisalall the subprojectswere expectedto be completedby December31, 1979. However,only five subprojectsout of the nineteen originalsubprojects, excluding the three study components,were completed within the originaltarget date. While other subprojectswere delayed, nine subprojectswere finallycancelled and replacedby substitute subprojectslater. The overallProject was completedin April 1984, 52 monthsbehind schedule.

3.12 The delay in Projectimplementation was causedmainly by delays in sub-projectpreparation and the long time taken for Governmentapprovals due to the lack of coordinationamong relatedministries. Since various governmentapprovals from differentauthorities were requiredfor subprojectsto be initiated,central coordination at the Governmentlevel was essentialfor their timelyimplementation. While delaysin approvals for some subprojectswere identifiedat the beginningof Project - 13 - limplementation,the lack of coordinationamong relatedministries which had differentauthorities in decision-makingresulted in delaysin subproject initiationand ultimatelythe cancellationof severaloriginal sub- projects. The approvalsfor the subprojectswere consideredwith the same detailedprocedures that governlarger investmentsbut not with the same urgency.

3.13 The slow decisionmaking process in GOI was also the main cause of delay in replacingthe droppedsubprojects. Followingthe cancellation of severalprojects, GOI could not agree on substituteprojects promptly. Even the implementationof substitutesubprojects was delayedfrom the plannedschedule due to delays in governmentapprovals. The Association appraisalFmission underestimated these institutionalconstraints facing Projectimiplementation.

IV. OPERATINGPERFORMANCE

A. Commissioningand Start-up

4.01 None of the subprojectswere faced with major technicalproblems in commissioningand start up. Rehabilitation/debottleneckingsubprojects had direct impacton the performanceof the concernedplants. These subprojectsas well as captivepower/utility components contributed to enhancingcapacity utilization by eliminatinginterruptions. New energy efficiencyequipment installed under the Projectalso improvedoperational efficiencyby saving inputsconsumption per unit of production.

B. Productionand CapacityUtilization

4.02 The beneficiariesgenerally achieved levels of productionas anticipatedat appraisalor higher exceptfor the few instanceswhere other unforeseenconstraints limited production. The table in the next page summarizesthe fertilizerproduction level of the major beneficiariesover the last four years. - 14 -

Iwrovmnt of Capiq Utillzation After the Project

Suproject Plant/ Caupletion After Project ~,Product Year BeforeProject 1981/82 1982/83 1983/84 1848

FCI Urea() 1982 54 - 60 58 57 RIF IIP(Trboy) 1980 76 101 75 95 85 Phephoric Acid (TrUay) 1980 61 79 70 80 81 HFC Urea (DuApwur) 1983 28 - - 46 38 Ur (Barazi) 1983 49 - - 40 25 NFL Urea (NaWgl) 1982 73 - 78 81 82 NLC Urea 1979 56 65 67 82 84 SAML CalciumA hia Nitrate 1981 39 66 8 19 14 NFL Urea 1979 79 88 77 65 86 GSFC Urea 1980 72 85 77 93 90 -porc Acid 1979 72 74 86 81 102 SPIC Urea 1980 71 86 92 76 105 ZAC Urea 1981 71 - 100 86 94 (WL Ures 1980 76 85 74 88 87 -TM00 Urea 1980 92 90 99 87 104

Interruptionsin power supplyas well as mechanicalproblems prevented FCI from fully taking advantageof additionalammonia storage facility at Sindricarried out under the Project. SAIL achieveda satisfactorylevel of capacityutilization at 662 in the first year after the commissioningof the naphthareformer subproject which enabledit to convertfeedstock from coke oven gas (COG) to naphtha. However,overall powershortages prevailingin the regionprevented it from realizingthe benefitsof the subproject. Also, HFC could not derive full benefitsfrom the subprojects due to the continuingpoor qualityof power supplyas well as shortageof feedstock. Measuresnow being implementedwould improvepower supplyand enablethem to achievesatisfactory operational performance.

V. FINANCIALPERFORMANCE

A. FinancialRate of Return

5.01 In November1977, GOI introduceda systemof ex-factory 'ricing-retention price formula-whichwould ensurea reasonablefinancial Late of return for fertilizermanufacturers under conditionsof efficient operations(The retentiinprice formulais explainedin detailin Annex 5-1). The formulasets the price at levelswhich would enablefertilizer manufacturers,operating at 80% capacityand at a reasonablelevel of input - 15 - consumption,to generatesufficient cash to cover productioncosts and a 12% after tax returnon capitalemployed.

5.02 At the time of Projectappraisal in 1975, fertilizerprices were set at levelssometimes insufficient to cover productioncosts. Therefore, the IDA CreditAgreement,included a covenant,requiring G0X to take action to ensure that ex-factoryprices, under conditionsof efficientoperation, would be sufficientto cover productioncosts, servicedebt, and earn a reasonablereturn on investedcapital.

5.03 Under the retentionprice formula,fertilizer manufacturers are guaranteedto earn approximately10% financialinternal rate of return (FRR) on new investmentsat 80% capacityutilization. As shown in Annex 5-2, FRRs for subprojectsimplemented in plantswhich operatedat a capacityhigher than 80%, therefore,are estimatedat 10% or above, Conversely,FRRs for subprojectcarried out by FCI, SAIL and HFC, which have achievedlow capacityutili!ation, are estimatedto be below this level.

B. FinancialPerformance

5.04 The introductionof the new pricingsystem improvedthe benefici- aries' financialsituation. Until the introductionof the retentionprice formula,the relativeprices between fertilizers and inputs (both of them were far below economicprices) did not allow even efficientfertilizer manufacturersto generateprofits. Becauseof the poor financial situation,most beneficiariescould not carry out plant improvements without funds from outsidesources. The introductionof the retention price systemcombined with an increasein capacityutilization improved the financialstanding of all the beneficiaries.A representativesummary of the recent financialperformance of selectedbeneficiaries (3 public sector companies,1 privatesector company, and 1 joint sector company)over the past four years is given in the table on the followingpage (See Annex 5-3 for details). - 16 -

Financial Situation Improvement of Indian Fertilizer M4nufacturers (in millions of Rupees)

1981/82 1982/83 1983/84 1984/85 FCI (Public Sector Company) CapacityUtilization (%) 54 60 58 57 OperatingIncome/Sales (x) (71.7) (32.3) (24.8) (13.8) CurrentRatio (times) 1.4 2.1 1.5 1.8 Debt ServiceCoverage (times) 0.0 0.6 0.3 0.8 Debt/Equity 0/100 0/100 45/55 45/55

RCF (Public Sector Company) CapacityUtilization (%) 87 77 90 84 OperatingIncome/Sales (%) 7.6 7.1 11.4 9,4 Curren.tRatio (times) 1.8 1.6 1.6 1.7 Debt Service Coverage (times) 1.8 3.2 3.3 3.5 Debt/Equity 36/64 40/60 36/64 38/62

NFL (Public Sector Company) CapacityUtilization (%) 69 71 71 71 OperatingIncome/Sales (%) 12.0 10.9 6.0 11.0 CurrentRatio (times) 1.4 1.2 3.2 2.7 Debt ServiceCoverage (times) 2.9 1,2 0.9 4.3 Debt/Equity 48/52 38/62 26/74 23/77

MFL (Private Sector Company) CapacityUtilization (Z) 88 77 65 86 OperatingIncome/Sales (%) 3.1 8.3 3.7 8.0 CurrentRatio (times) 2.8 2.8 2.4 2.5 Debt ServiceCoverage (times) 0.5 a/ 0.4 a/ 9.1 N/A a! Debt/Equity 46/54 0/100 0/100 0/100

IFFCO (Joint Sector Company) Capacity Utilization (%) 99 100 91 107 OperatingIncome/Sales (%) 13.4 12.6 11.8 9.7 CurrentRatio (times) 3.0 2.7 2.1 2.2 Debt ServiceCoverage (times) 2.8 2.7 0.9 2.0 Debt/Equity 45/55 43/57 34/67 33/67

a/ The entire amountof long term loan was paid back over 1981/82 - 82/83 period. b/ No debt service.

5.05 As shown in the above table, all the financial ratios stayed at satisfactory levels as long as the fertilizer companies achieved a reasonable level of capacity utilization. However, finances of those companies having operated at low capacities have been weak as well - 17 - illustrated in the case of FCI. Among the 13 subproject sponsors, three companies (FCI, HFC and SAIL) fell into this category.

VI. SECTORAL AND ECONOMIC PERFORMANCE

A. Economic Rates of Return

6.01 Based on updated assumptions on capital costs and capacity utilization, economic rates of return have been calculated for subprojects whose benefits are quantifiable, ranging from 11.6X to 100. Incremental benefits and costs take into account the recent operational performance of the plants. Except for those carried out by HFC and SAIL which have been operating at capacities substantially below the levels anticipated at appraisal, updated ERRs are close to appraisal estimates. A comparison of ERRs between appraisal estimates and actuals is given in Annex 5-2.

B. Stability of Fertilizer Supply

6.02 Historical supply and demand of fertilizers over the past 25 years are given in Annex 6-1 and summarized in the table below:

India- PastFertilizer Conumption,Production, and Deficit (in million tonns of nutrient)

Nitrogen (N) Phosphate (PzO) Potash (K) Totals Year Cons Prod. Deft. Cons. Prod. Deft.Cons. Prod. Deft. Cons. Prod. Deft.

1959/70 0.23 0.08 0.15 0.05 0.05 - 0.02 - 0.03 0.31 0.14 0.18 196/70 1.36 0.73 0.63 0.42 0.22 0.20 0.21 - 0.21 1.98 0.95 1.03 1974/75 1.77 1.19 0.58 0.47 0.33 0.14 0.34 - 0.34 2.57 1.52 1.05 1979/80 3.50 2.23 1.27 1.15 0.76 0.39 0.61 - 0.61 5.26 2.99 2.27 1980/81 3.68 2.16 1.52 1.21 0.84 0.37 0.62 - 0.62 5.52 3.01 2.51 1981/82 4.07 3.14 0.93 1.32 0.95 0.37 0.68 - 0.68 6.07 4.09 1.98 1982/83 4.26 3.43 0.83 1.42 0.98 0.44 0.74 - 0.74 6.42 4.42 2.00 1983/84 4.90 3.50 1.40 1.62 1.00 0.62 0.81 - 0.81 7.33 4.50 2.83

AymE Aneil Growth Rte) 1959/60- 1979/80 14.6 18.1 17.0 14.6 18.6 15.2 16.5 1959/60- 1983/84 13.6 17.1 15.6 13.3 16.6 14.1 15.6 1974/75- 1983/84 12.0 12.7 12.7 13.1 10.1 12.4 12.8 1979/80- 1983/84 8.8 11.9 8.9 7.1 7.3 8.7 10.8 - 18 -

Consumptionof all fertilizersincreased from 305,000 tyn in 1959/60to 8.2 milliontyn in 1984/85at an averageannual growth rate of about 14e00%. Over the saae period,local productionof fertilizersincreased at a faster pace (averageannual growth rate of 15.6%). Therefore,import requirements as percentageof total fertilizersdeclined from 58% in 1959/60to 36% in 1984/85.

6.03 The Projectenhanced the domesticfertilizer production base substantiallyand improvedthe stabilityof fertilizersupply for agriculture. During 1979/80-1984/85period, the growth rate of domestic fertilizerproduction outpaced that of consumptionmore rapidlythan previousyears mainly becausesubprojects carried out under the Project came on streamduring the period,substantially raising production levels of existingfacilities.

C. EnvironmentalAspects

6.04 Most of the subprojects,which have aimed at better plant performancedirectly and indirectly,contributed to improvingthe environmentalsituation of the beneficiaries.The beneficiariesinstalled pollutiontesting and controlequipment and trainedthe plant personnelon theiruse, thus improvingthe environmentquality of the plants;new productstorage systems reduced the potentialof future environmental problems;new waste recoveryunits and energyefficient equipment helped to reducethe level of pollutantsand so did retrofittingof old plants.

VII. ASSOCIATIONPERFORMANCE

7.01 The Associationhad financedseveral grassroot fertilizer projectsuntil it recognizedthat the same priorityshould also be given to modernizationof existingfertilizer production facilities whose capacity utilizationremained low. Once this need was identified,the Association moved quicklyto provideassistance to GOI in implementingappropriate measures. During Projectimplementation, the Association'ssupervision missionsdetected various problems causing delays in the initiationof subprojectimplementation, and conveyedrecommendations promptly in order to expeditethe decisionof the Government. Particularlywhenever Project scopeneeded revisionto replacesome of the originalsubprojects, the Associationprocessed it quicklyto enablethem to be implementedon time.

7.02 DuringCredit negotiations,GOI had agreed to implementthree fertilizerindustry related studies which would providethe basis for fertilizerindustry development planning. These studieswere: (i) fertilizerdemand projection;(ii) fertilizertransportation study; and (iii)study on fertilizerstorage. All the studieswere undertakenby local researchinstitutions. The Associationhad reviewedwith the Departmentof Agriculture(DOA), the study sponsor,the scope of studies, and followedup the studies. The findingsof the studiescontributed to the bettermentof GOI's fertilizersector planningas well as to the - 19 - formulationof Bank Group lendingstrategies. A 12-membersteering advisorycommittee in DOA supervisedthese studies.

7.03 At the recommendationof the IDA projectteam, the giant public sector company,Fertilizer Corporation of India (FCI),which had operated seven large scale fertilizerplants scattered throughout India, was restructuredinto five smallerand more manageableregional corporations, namely: (i) FertilizerCorporation of India (FCI); (ii) Hindustan FertilizerCorporation (HFC); (iii) RashtriyaChemicals Fertilizer (RCF); (iv) NationalFertilizer Limited (NFL);and (v) Planningand Development India Ltd. (PDIL). FCI, with plants in diverseregions, was poorlymanaged due to lack of effectivecentralized management and coordination,slow decisionmaking process,and difficultiesin corporateplanning. Recogniz- ing this managementproblem from the inceptionof the projectwork, the IDA projectteam had recommendedreorganization of FCI into severalsmaller regionalcompanies of manageablesizes. The reorganizationwas formally announcedin late 1977 and took effect in late 1979. it has been generally acknowledgedthat the reorganizationhas fully servedthe purpose.

7.04 As mentionedin para 5.02, IDA recommendedto GOI to reviseits fertilizerpricing mechanism, and consequentlythe retentionprice formula was introducedin 1977. In the mid-1970s,ex-factory fertilizer prices were maintainedlow to subsidizeagriculture. At times,fertilizer prices were set at levelswhich did not allow even efficientmanufacturers to cover productioncosts. Therefore,IDA recommendedto GOI to considera pricingmechanism which could ensurea reasonablerate of returnon investmentsfor efficientoperators. This retentionprice mechanism improvednot only the financialviability of fertilizermanufacturers but also operatingefficiency. The retentionprice formulapenalizes low capacityutilization as well as high input consumption.

VIII. LESSONSLEARNED

8.01 Althoughthe Projectwas ultimatelyimplemented and achievedmost of the originalobjectives successfully, several lessons have been learned from the problemsthe Projectencountered during implementation. These problemscaused a substantialchange in Projectscope as well as a 52-month delay in Projectcompletion.

8.02 One importantlesson was that a projectinvolving a numberof differenttypes of subprojectsshould be designedto providefor a strong centralcoordination unit to undertakethe responsibilityfor coordinating and implementingthe subprojects.Particularly in countrieswhere the decisionmaking processis scatteredand diverse,coordination at the Governmentlevel is key to successfulimplementation of projects. In fact, delaysin Projectimplementation and changesin Projectscope were mainly due to lack of coordinationamong concernedGovernment authorities which providevarious approvals for subprojectsin terms of scope, technology, economicviability, local fund allocations,and other aspects. The lack of coordinationalso made it difficultto determinealternative subprojects - 20 - timelyfor IDA consideration.If similarproblems are anticipatedfor a futureproject, Government approval requirements and proceduresshould be closelyassessed during appraisal,and, if necessary,practical assurances from the Governmentsshould be obtainedbefore the signingof loan (credit) agreement. These assurancesalso need to be supportedby a responsible projectcoordination unit which is obligatedto monitor,coordinate, and expeditethe implementationof subprojects,particularly for sector/program creditswith numeroussmaller subprojects in countrieswith diversified decisionmaking process.

8.03 The other importantlesson learned from the Projectwas that the originalconcept of the Projectcould have workedout quite well if the Projecthad concentratedon a more limitednumber of relativelylarge subprojects. Throughoutthe implementationof the Project,it was almost impossiblefor the IDA projectteam to effectivelymaintain relationships with numeroussubproject sponsors for the supervisionof their respective components. Where a numberof small subprojectsare implementedunder one projectscope, frequentscope changescannot be avoided. As nine original subprojectswere droppedand replacedby 26 new subprojects,tremendous additionalefforts had to be made by the IDA projectteam to followup these changes. For a projectwith similarconfiguration, a typicalsector loan appearsmore appropriateto handle. In this case,greater authority could be given to borrowersin implementingthe overallprogram including the selectionof subprojectsbased on agreedguidelines. Frequentrevision of the legal documentsalso could be avoided.

8.04 Another lessonlearned from the Projectwas that well established progressreporting should be incorporatedin designinga projectwith a number of projectsponsors, possibly by standardizingof the reporting formatand contents. While directproject progress reporting by project sponsorsis generallypreferred as a means of maintainingdirect communicationwith the beneficiaries,unstructured reporting from numerous beneficiariesmakes it difficultto monitor individualsubprojects systematically.Due to the lax descriptionof reportingrequirements, the progressreports submitted by the subprojectsponsors differed to a large extent in terms of contentsand detailsof subprojectprogress. Some reportsdid not even containproject related information at all. As a consequence,the supervisionof the Projectwas not satisfactory,and the preparationof ProjectCompletion Report (PCR)was delayed. Besides,the Borrowercould not prepareits own PCR despitethe specificguidance providedby the IDA projectteam well in advanceof the completionof the Projectin August 1982 and repeatedrequest thereafter. Supervision workloadcould have been reducedtremendously if a good progressreporting systemhad been designed. - 21 -

INDIA - FERTILIZlR INDUSTRYcRatl

PROJgCt COMPUTtONRUPORT

Revtelon of Pro1ect Scope (SubProjects)

Plant Original Subproject lst Revision 2nd Revision 3rd Revision 4th Reviston Coeeny Location (Deceber 1975) (March 1978) (January 1980) (June 1980) (AprVl 19S1)

PCIvf Corskhpur Botir/Pover Set (25 Ib) (Dropped) - _ _ - oAmontastorage (Drooped) Sindri A-Amonti storage

erC#/ Tronbay llollr (170 TPR) Pollutton controllteittag - heedstock converston - Phosphoric acid dobottlo neking AMP Plant Rehabilitation

NPCI/ Durgapur Boiler/Power Set (12 MW) - eAmoniSPump Modification - - - - sAmontsStorag- Sereuni - Plont Modification - AmmoniSStorage Nasrup - Plant todt8catitoncs Namrup/Sreunt - Carbamate Pump RPplacement SaldiS - Aonat Storase/tank Wagons

PDII/ PPDIL Ion-daetructive Testing Sqpt.

"La/ angal - Amonti Storage - - - - Amontia Tank V

NuC eyveli Feedecock Converaion

tSC (SAIL) lourkels Peedatock Convernion oSFC b rod& Purge Gee Recovery Fluorine Recovery (Dropped) - - Phoaphoric Acid Plant debottlenecking

IPCL Troebey Refinery Debottlenecking (Dropped)

NUL tadree Urea Debottlenocking ( ) AmonmiaProcess Control ( ) - - - Utit/Pollution Control ( ) AMonDI Plant - - Rehabt attit1on $PIC Tutteortn Prourine Recovery (Dropped) Soda Ash/Amontum Chloride Plant (Dropped) - Purge Gen Recovery - - hnAmonti Storage AmeontePlant Optt. - - - AAmonti Optla. Study

CYL Vtieg Hapetnam Soilar/Powr Set Fluorine Recovery (Dropped)

ZAC Coa Ammonia D bottlenacking Urea Plant Pollutton Control - - Maintenance Crone (120 ton)

IrPCO Kalol - Amont Dbottlenecking - AmIneCuord - Purge tes Recovery - 1Oifired Boller 002 Coeprossor KanatA - onti Storage

GOt NCAIR fertilizerDemand Study - RIT8S fVrttliter Traneportation Study ASC FertilizerStorage Study -

1 PCI. the ortgtnol nponcor of all PCI Project coponenrec vw split into the above fitv coepenite in late t979.

Induetry bepartent Matrch 1986 - 22 - AENEX2-2

INDIA - FERTILIZERINDUSTRY CREDIT

PROJECTCONPLETION REPORT

Conparisonof Project Cost and Credit Allocation

lin sillions of U.S.dollarsunless otherwise sentioned)

Project Cost Credit Allocation Pro3ect ------CompanyPlant Location Sub-pro;ect CompletionAppraisal ActualAppraisal Actual

FCI 6orakpur Boiler Cancelled 23.5 - 10.8 Ammoniastorage a 20.5 - 9.1 - Sindri Amoniastorage Aug. 1982 - 3.4 - 2.2 RCF Tromboy Boiler Aug.1977 12.9 9.0 8.5 8.0 * Pollutioncontrol Jun.1982 0.3 0.6 0.3 0.2 FeedstockConversion Feb. 1979 - 6.9 - 4.1 Phos.acid debottl. Jan. 1990 - 1.3 - 0.5 * AN rehabilitation Jul. 19t2 - 2.1 - 0.2 HFC Durgapur Boiler Sep.1983 20.7 17.0 8.7 9.4 Ammoniapump modif. I983 - 0.6 - 0.4 Amoniastorage Jul. 1983 - 3.3 - 2.0 -arauni Plant Nodification 1983 - 0.6 - 0.4 Ammoniastorage Jun.1983 - 3.6 - 2.2 Narup Plant modification Nat.1983 2.1 - 1.4 Naldia Amoniastorage/tank Feb. 1983 8.2 - 5.1 NFL Nangal Ammoniastorage/tank Jul. 1992 4.5 - 3.4 NLC Neyveli Feedstockconversion Jul. 1979 19.5 21.2 12.0 10.9 SAIL Rourkela Feedstockconversion Sep. 1979 26.1 22.4 15.5 16.2 GSFC Baroda Purgegas recovery End-1979 11.3 10.5 5.3 0.4 Flourinerecovery Cancelled 2.7 - 1.2 a Phos.acid debottl. 1979 6.6 6.6 2.5 4.1 IP6L Tremboy Refinerydebottl. Cancelled 25.9 - 4.0 - NFL Nadras Ureadebottl. Cancelled 1.7 - 1.0 - * Amooniadebottl. 1979 - 0.8 - 0.5 SPIC Tuticorin Florine recovery Cancelled 2.7 - 1.3 - Sodaash plant Cancelled 43.5 - 12.7 - Purgegas recovery 1983 - 1.6 - 1.3 Asmoniastorage 1983 - 6.8 - 4.6 Amniaplant optim. hay. 1982 - 0.8 0.5 CfL Visag Boiler End-1980 3.0 3.1 1.0 1.7 Fluorinerecovery Cancelled 5.5 3.0 - ZAC Goa Ammoniadebottl. Jun.1982 7.2 9.9 4.0 8.1 Pollutioncontrol Jun. 1982 3.0 2.5 2.0 1.6 Crane Jun. 1982 - 1.2 - 0.8 IFFCO Kalol Amoniasodi./debottl. 1980 - 10.0 - 4.9 a CD?compressor 1984 - 3.3 - 2.3 Kandala Ammniastorage 1991 - 3.9 - 3.0 POIL Testingequipments 1984 1.1 1.1 1.1 1.1 601 Threestudies Completed 1.0 0.4 1.0 0.4

TOTAL 239.7 169.2 IO.Q 101.9 =a--=s ,=2 - :2-32= 233532 - 23 -

lOW. nanumloa wallimmlC

3883.ftatUIt* 30839?U81833383iI 810I *'to" In ezttl"t "Srit

fapities .171 M7 914 8

3. .tt tlt Gh.a3. 'tro,m.z, , Led. td(181?) 8 7 * Udv9-ade) a 150is )1.9 )S.?12.8 s3.S *blofCeu I 3oS2.'O I I338.5 1 _ -ft COCdd410l l/3 40.0 ) 10. )327.1 134.3 107.9

U98ahh7t - Ut3t #rade" or" WsptbM Ul.0 t3.2 *1.1 t0.3 9.4 nit)s - 93bs8 U, ort. 1 Oil0 19.0 131. III.$ 123.9 1ts. SInAat - sadist, edeob U"t. 8k 225.0 18.9 13.S 11.0 $93. 24". Otis" of"t o3 228.0 9.8 o 19.5 42.I 35. 1

*. ldw_et httlUut Uttp. td. (gm8.) 8,taui - 51p* otr 8S21 35.0 74.2 18.1 90.8 27.1 bwgss4 9_- t how gm 8*P9t41 353.0 80.0 1.4 49.4 51.5 g - Aaae r Ut.". Al let.,) a" 3l1.* 304.9 300.1 8.4 88.2

J. Watt.. vent 0 Ltd. (. 33.3 Satiad.- "Ajl U.1to.tl 03 235.0 o33.7 3.0*10.1 141.6 Maps3 - *Ajab Ur*$IAN. t SItttett7/lml0il 232.0 30.4 I8OJ 318.0 212. 188e1. _ b,tct gt.m Awl 034 225.0 782.3 388.9 343.0 351.3 6.. 959s3 3.L9.4t. "tp.OIW) - t9*t - tad) Itis ug cW.3oil 10.0 45.2 41.1 11.821U. 7. 8.*htyt w. alass d" 9filter1Ltd33 (UP1) iN_ Matt_trm ntSdlst - Ctt ttt ueLtd- a)t",.Ut. W.F1. AOWl letr.",the "a. 14.0331.0 IS6-0101.3 2*X.00.4 113A271.4 Is-.X24.9 8. 83ed* I tit.lt.0 y 7.2O.1.4.388t3 lmot). - Or"".. cO "Pubt_/c 120.0 1U.4 30.0 22.9 89.7 1 8wl1 p eat. aU Cd* 38.0 38.3 37.0 j.j W.8 tot.)413 11t Sactor 2I9*. 13.4.2 1.599.8. 2 100.8 3.S0032

e. 1EftaLbSto 1. caetaidul ft.8*133. Ltd. (313.3 ""S - Vthta Pt.ds" or". 81. 39 usphzh 89.0 13.3 83.0 73.1 11.3 2. 8t8 - 1ttrp (1014.) Emma. * t10t Wets. Aft 8 1 38.0 8.0 1.7 *.2 9.2

Setwb - 04Jm Una. Vat 0aI 27I.0 2.9 3t8.2 33. 212.0 . O_rt 8.t*t lall,ent co. (am) ,ads - jt.t U,. As.Do, o lephthet.t)t t31.0 200.8 384.4 201.9 233.8 am i. owl lWitt44., t. (03) fwa.o4 * 813. 1r88.. A/C) CROW 30.0 2.3 3.2 3.4 3.3 8. 10108p3.l1wa Lod. (383) SassW* Ott., 9,80.8 W". 8*Pbtb* 310.0 M02. 262.9 IRA. 288.3 7. bq.18e Cheast..) as ft.n1)3..t Ltd. (MM13) Mes...s - r.agamshz Ut.. Ueht1w 318.0 339. 91.2 304.2 334.0 8. SJab letlm) 1so.831., (M0) an59 U.jdi iaj39 gem 9.l Ott 3.0 *2.3 8. rirsm 34zit1.wr Cupr. (we) tats, - pAjorth" Uat" 8.14th. 32.0 323.3 343.4 131.7 134.1 to 011ethat fttreehad88 Was.tes. Cu. (5I33 Ttuttarti * tad) 8.9. gm..8. NW lphth. 293.0 209.2 218.3 298.3 208.9 It. t.t.Ci ad Sta) Co. (tuISC) 3.1 2.9 84 j.alwd 1 s * 8th., As cam1 4.0 3.3

S"04)Col 0.. Ur". sophtwe 81.70 344.3 373.8 140.9 34413 ltot. Private. $"Otf W.3.8 3.019.9 3.393_ 137S1.0 3.993.9 C. Opam..lyo 8.etu

ta.d2../Klo) boj.ze: gre. 8?. M3 let..i. a". 380.0 215.3 27.1. 213.0 323.8 58dw38i Ott., hvabib Was, 11111111 228.0 383.2. 348.8 374.2 20.3 TOt. C.e"aatt'. Sect., 443.0 ,3..1 443.9 40. $13.9 ot)tonsi 51349.0 2.342.4 1,434.1 3.180.O 1,931.0

fmgji ?tttlt..sha.et.tt..oof 3.,1.4 ad 81.ltzy of 0"1mIcal ead1.,t3t.ltsa

atchtt3988 ta - 24 - ANNEX 3-1

INDIA - FERTILIZERINDUSTRY CREDIT PROJECTCOMPLETION REPORT

DisbursementSchedule for the Bank Loan (in US$ million)

AppraisalEstimate Actual CalendarYear (November1975) (1985) and Quarter Disb. Cumul. % Disb. Cumul. %

1976 I 10.5 10.5 10.0 0.0 0.0 0.0 II 3.1 13.6 13.0 1.0 1.0 1.0 III 3.2 16.8 16.0 0.3 1.3 1.2 IV 4.2 21.0 20.0 0.5 1.8 1.8

1977 I 6.3 27.3 26.0 5.2 7.0 6.7 II 7.3 34.6 33.0 0.5 7.5 7.1 III 11.6 46.2 44.0 1.9 9.4 9.0 IV 11.6 57.8 55.0 2.1 11.5 11.0

1978 I 13.6 71.4 68.0 2.7 14.2 13.5 II 12.6 84.0 80.0 3.8 18.0 17.1 III 10.5 94.5 90.0 3.5 21.5 20.5 IV 10.5 105.0 100.0 4.0 25.5 24.3

1979 I 4.6 30.1 28.7 II 5.8 35.9 34.2 III 1.2 37.1 35.3 IV 2.5 39.6 37.7

1980 I 11.4 51.0 48.6 II 9.0 60.0 57.1 III 3.2 63.2 60.2 IV 5.4 68.6 65.3

1981 I 6.6 76.4 72.8 II 7.6 83.6 79.6 III 8.2 87.9 83.7 IV 8.2 89.5 85.2

1982 I 2.8 92.3 87.9 II 4.6 96.9 92.5 III 2.1 99.0 94.3 IV 0.9 9909 95.1

1983 I , 1.3 101.2 96.4 II 0.7 101.9 97.0

* US$3.1 millioncancelled

IndustryDepartment March 1986 - 25 - ANNEX 5-1

INDIA - FERTILIZERINDUSTRY CREDIT PROJECTCOMPLETION REPORT

RetentionPrice Formula

1. The retentionprice of fertilizersis calculatedon the basis of the formulaenunciated by the MaratheCommittee in November 1977. The calculationsare made for pricingperiods for 3 years as follows:

(i) Share capitalemployed in urea production.

(ii) + RetainedEarnings.

(iii) - Capitalemployed outside the businessand accumulated surpluscash.

(iv) - Equity employedin line of business(a minimumlevel is maintainedat paid-inshare capital).

(v) 29.4% returnon capitalemployed.

(vi) + Variableand fixed productioncosts at 80% capacity utilizationrelated to fertilizerproduction, with depreciationas providedin the companybalance sheet.

(vii) + Intereston short and long-termdebt associatedwith urea production. In each successiveblock of 3 years, interest on long and short-termdebt are consideredequal to those of the middle year.

(viii) - Ex-factoryrevenue to producer.

(ix) = Productionvolume of fertilizerat 80% capacity utilization.

(x) = Unit RetentionPrice allowed.

2. While operatingcost changesare reflectedimmediately, other parameterslike capitalemployed and interestcharges are only reassessed in intervalsof three years. Fixed assetsare not revaluedeach year, but recordedat historicalcosts.

IndustryDepartment March 1986 - 26 -

ANNEX5-2

INDIA-FERTILIZER INDUSTRY CREIT

PROJECTCOUPLETION REPORT

ComparisonofFinancial and Econosit Rates of Return

FRRM%) ERRM%) Project ------CompanyPlant Location Sub-project CompletionAppraisal Actual Appralsal Actual ……-…-----______… - -_ FCI Sorakpur Boiler Cancelled 14.0 - 22.0 RSF Ttomboy 8oiler Aug.1977 15.0 11.1 26.0 35.9 * FeedstockConversion Feb. 1979 - 11.7 - n.a NFC Durgapur Boiler Sep.1983 18.0 3.0 26.0 11.4 NLC Neyveli Feedstotkconversion Jul. 1979 27.0 12.0 41.0 36.1 SAIL Rourkela Feedstockconversion Sep. 1979 15.0 1.5 33.0 12.6 SSFC Baroda Purgegas recovery End-1979 33.0 11.5 41.0 44.6 Flourinerecovery Cancelled 30.0 - 21.0 - 3 Phos.acid debotti. 1979 47.0 12.0 40.0 36.1 HPCL Troeboy Refinerydebottl. Cancelled 49.0 - 26.0 NFL Nadras Ureadebottl. Cancelled 65.0 - 100.0 U Ammoniadebottl. 1979 - 10.0 - 1O0.0 £ Sodaash plant Cancelled 19.0 - 18.0 - CFL Visag Boiler End-1980 80.0 10.5 70.0 63.6 * Fluorinerecovery Cancelled 36.0 - 29.0 - ZAC Goa Ammoniadebottl. Jun.1982 14.0 12.3 52.0 46.0 IFFCO Kalol Amoniaaodi.Idebottl. 1980 - 10.5 - n.a - 27 -

INDIA - FSItitL122M INDISTRYCREDRT

PROJECTCONPL?tION RgPORT

Su nariof lPnancil lnforation for Selectcd Sub-borrovers (inSc. dillton unlses otherwise mentioned) 1981/82 1982/83 1968164 1984/15

1. FCI Cross Sales Revenues 1,76S 2,497 13254 1,267 Operating Profit (1.268) (8071 (406) (451) Total Assets S,263 6,411 1132R6 11,172 Operettag Profit/Sales (RI (71.7) (32.3) (24.8) (13.8) Current Ratio (ties) 1.4 2.1 1.5 I.8 Debt Service CoverageRatio (2) 0.0 06 0.1 0.8 Debt/Lquity Ratio 0:100 0:100 45:55 45:5S 2. RCF Gross Sleos Revenues 2,4n) 2,524 4,307 4,183 Operating Profit 188 179 492 410 Total Assets 5,7)6 7,S91 10,748 12,823 Operating Proftt/Sales (2) 7.h 7.1 11.4 9.4 Current Ratio (times) 1.8 1.i 1.6 1.7 Debt ServiceCoverage Ratio (2) 1.8 1.2 1.3 3.5 Debt/Equity Ratio 36:64 40:60 36:64 18:62

3. NnL Grose Selea Revenues 3,197 3,160 4.198 3,790 OperatingProfit 383 14h 253 41S total eaets 6,.97 5,900 5,029 5,310 Opereting Profit/Seles (2) 38.4 35.9 23.2 28.2 Current Ratio (ties.) 5.0 3.9 1.2 2.7 Debt Service Coverage Ratio (2) 2.9 1.2 0.9 4.3 Debt/Pquity Ratio 40:52 38:62 26:74 23:t7

4. aCL t CrossSala. Revenues 322 Z9* 461 382 OperatingProfit 42 21 47 5 total Assets - - - - Operating Profit/Sales (2) 1Z.9 1.t 10.1 3.2 Current Ratio (times) 70.0 6.S 8.2 4.2 Debt Service Coverage Ratio(S) 31.3 67.8 1,259.4 416.4 Debt/Equity Ratio 2:98 0:100 N:ino 0:00 5. NIL Cross SaleI9evenues 1,561 1,720 1,724 Operating Profit , 48 143 63 total Assets 895 813 705 Operating Profit/Sales (X) 3.1 8.3 3.7 Current Ratio (times) 2.8 2.8 2.4 Debt Service Coverage Ratio (S) 0.5 / 0.4 '/ 9.1 Debt/Equity Racto 46:54 0:100 o0:300

6. ZAC Grose Sales Revenues 929 1,146 1,187 1,538 Operating Profit (I5) 195 132 191 Total Assets 747 872 894 1,033 Operating Proftt/Seles (t) 1.6 14.5 9.5 12.4 Current lltio (tiets) 3.3 3.7 2.9 3.2 DebtService Coversge Ratio(2) - - - - Debt/Equity Ratio 35:65 25:75 27:73 26:74

7. SPIC Croes Sales Revenues 243 306 291 508 Operating Profit IS 26 15 36 Total Aiset* 190 200 232 101 OperatingProfit/Salee (2) 6.2 8.5 5.2 7.1 Current Ratio (ties.) 1.7 1.6 1.8 1.5 Debt ServtceCoverage Ratio (2) 2.2 1.7 1.4 1.7 Debt/Equity Ratio 85:15 2:28 531:47 42:58

8. WtCO Cross Sales Ravnuas 4,484 5,146 5,379 7,468 OperatingProfit 600 646 633 724 total Assets S,220 6,166 6,520 7,672 OperatingProfit/Sales (2) 13.4 12.6 11.8 9.7 Curront Ratio (timsc) 3.0 Z.7 2.1 2.2 Debt Service Coverage Ratio(S) 2.8 2.7 0.9 2.0 Debt/Aity Ratio 45/55 43/57 14/66 33/77

Industry Departtent Marcb 1986 ANNM 6-1

INDIA- FERUD.M IDISI CDTE

Historical Cavgwtion, Production andibLBrtS Of Fertilizers, 1983/84 (itn '000 tons of tutredts)

Nitrogen H Pbtash Al Nutrients Year Cs. Prod. 'pro Cans. Prod. Ckxs. Prod. Cans. Prod. Tprt

1959/60 229 84 142 54 51 4 21 - 33 305 135 179 1960/61 212 112 399 53 54 - 29 - 20 294 166 419 1961/62 250 154 3D7 60 65 - 28 - 75 338 219 382 1962/63 333 194 244 83 88 10 36 - 41 452 282 285 1963/64 377 219 228 116 108 13 50 - 40 544 327 281 1964/65 555 243 232 149 131 12 69 - 57 773 374 301 1965/66 575 238 326 132 119 14 77 - 73 785 357 413 1966/67 738 309 832 248 146 148 114 - 118 1,101 435 898 1967168 1,034 402 867 335 207 349 170 - 270 1,539 609 1,486 1968/69 1,209 563 844 382 213 138 170 - 213 1,761 776 1,195 1969/70 1,356 730 667 416 224 94 210 - 120 1,980 954 881 1970/71 1,479 832 477 541 228 32 236 - 120 2,256 1,060 629 1971/72 1,798 949 481 558 290 248 300 - 268 2,657 1,239 997 1972/73 1,839 1,054 665 582 330 204 347 - 325 2,768 1,384 1,194 1973/74 1,829 1,050 659 650 324 213 360 - 370 2,839 1,374 1,242 1974/75 1,766 1,186 884 471 331 286 336 - 437 2,573 1,517 1,607 1975/76 2,149 1,535 996 467 320 361 278 - 278 2,894 1,855 1,635 1976/76 2,459 1,859 750 635 478 23 319 - 278 3,411 2,335 1,051 1977/78 2,913 2,000 358 867 690 164 506 - 599 4,286 2,670 1,521 1978/79 3,419 2,169 1,228 1,106 776 243 592 - 517 5,117 2,945 1,988 1979/80 3,498 2,226 1,295 1,151 1,763 237 606 - 473 5,255 2,988 2,005 1980/81 3,678 2,164 510 1,214 842 452 624 - 797 5,516 3,006 2,759 1981/82 4,069 3,143 1,055 1,322 950 343 676 - 644 6,067 4,093 2,042 1982/83 4,263 3,434 425 1,420 984 65 735 - 644 6,418 4,418 1,133 1983/84 6,236 3,487 656 1,757 1,057 143 799 - 556 7,792 4,544 1,345 1984/85 5,486 3,917 n.a. 1,886 1,318 n.a. 839 - n.a. 8,211 5,235 n.a.

Source: The Fertilizer Association of India (FAI).

Lbutry Departmnet M rdh 1986