KATHMANDU, Aug 17: Debate has resumed over moving forward with the long-discussed plan to establish a chemical fertilizer factory. Prime Minister KP Sharma Oli has expressed interest in advancing the project after shortages of chemical fertilizer were reported during rice and millet planting seasons.
Amid the shortage, Prime Minister Oli recently discussed fertilizer supply and the operation of a fertilizer production industry with Agriculture Minister Ramnath Adhikari, Commerce and Supplies Minister Damodar Bhandari, and other officials. Setting up a chemical fertilizer factory is estimated to cost over NPR 10 billion. With the government struggling to raise the required investment, India’s state-owned Indian Oil Corporation (IOC) has shown interest in investing.
Both the Nepal Oil Corporation and IOC are willing to invest in the chemical fertilizer industry. Chandika Prasad Bhatt, Executive Director of the Oil Corporation, informed the Prime Minister that IOC is also interested in investing in the fertilizer factory. Bhatt said that if the Oil Corporation leads the project, IOC is ready to come on board as a strategic partner.
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He emphasized that the chemical fertilizer industry requires significant investment and large-scale production. Since domestic consumption alone would not suffice, foreign partners are needed for market access. “We have informed the Prime Minister that IOC has expressed interest in investing,” Bhatt said, “and the Prime Minister has asked us to prepare the operational plan for the fertilizer factory.”
Although the idea of establishing a fertilizer factory has been discussed for a long time, it has yet to materialize. The government currently provides an annual subsidy of about NPR 2.8 billion for chemical fertilizers, while over NPR 4 billion worth of fertilizers are imported into Nepal each year.
The Ministry of Agriculture and Livestock Development had prepared a model suggesting that 65 percent of the total cost could be financed through loans, with the remaining 35 percent coming from the government, private sector, and foreign partners. With timely access to locally produced fertilizer, farmers could benefit directly. Bhatt emphasized that the Oil Corporation is ready to proceed once the government formally assigns the responsibility.
The idea of a chemical fertilizer factory in Nepal dates back to 1984, when a study was conducted with support from the Japan International Cooperation Agency (JICA). Even after four decades, the factory has not taken shape. Previously, a meeting of the Investment Board chaired by Prime Minister Oli had reviewed the final detailed feasibility study and decided to move the project forward. A committee has also been formed to review the study submitted by Germany’s DIAG Industries GmbH and recommend suitable options.
Stakeholders say delays in establishing the factory have been due to a lack of firm government commitment. While it is feasible to set up a chemical fertilizer factory in Nepal, challenges remain in securing investment, ensuring raw material supply, managerial capacity, and determining plant capacity. A large portion of government subsidies is currently spent on purchasing imported fertilizers.
Globally, chemical fertilizers are produced using natural gas, thermocol, and water electrolysis technologies. Studies in Nepal have explored models using gas, electricity, and coal. Some experts argue that a factory based on natural gas is more cost-effective, while others advocate for water- and electricity-based production to increase domestic power consumption.
