Mounting delays and rising costs at the Talcher Fertilizers Ltd (TFL) project in Odisha have prompted Finance Minister Nirmala Sitharaman to call a high-level meeting on June 6 to review the situation. The project, considered crucial to India’s plan for reducing urea imports and leveraging domestic coal through gasification, has run into multiple execution and financial hurdles, prompting concerns at the highest levels of the government.

Senior officials, including Financial Services Secretary M Nagaraju, Fertiliser Secretary Rajat Kumar Mishra, and TFL Chairman Deepak Gupta, are expected to attend the meeting. This intervention follows the recent credit rating downgrade of TFL by ICRA, which lowered its long-term fund-based term loan rating to BBB+ from A-, citing serious construction delays and a negative financial outlook.

Execution Delays and Cost Escalation

The TFL project, which aims to set up a 1.27 million metric tonnes per annum urea plant based on coal gasification, has seen its scheduled commercial date of operation pushed back by almost three years—from the original deadline to June 2027. These delays stem from pandemic-related disruptions, design scope changes, and ongoing operational bottlenecks.

Simultaneously, the project’s estimated cost has ballooned from ₹13,277 crore to ₹17,080 crore—an overrun of nearly ₹3,800 crore. The rise is attributed to increased commodity prices, rupee depreciation, and other technical adjustments. As of October 31, 2024, the project had achieved just 63.75% physical progress, as informed by Minister of State for Chemicals and Fertilisers Anupriya Patel in Parliament.

Geopolitical and Technological Challenges

Further complicating the project is the involvement of a Chinese contractor as the lump sum turnkey (LSTK) partner. This has led to execution challenges and coordination issues, raising both geopolitical and operational concerns. The project’s reliance on indigenous coal with high ash content also poses technological challenges, particularly with the use of coal gasification—a process relatively new to India at this scale.

TFL, a joint venture between Coal India Limited, GAIL (India) Limited, and Rashtriya Chemicals & Fertilisers, is expected to showcase the viability of using domestic coal for fertilizer production. To support long-term financial stability, the government had introduced a policy in 2021 guaranteeing a 12% post-tax equity IRR for eight years from the start of production.

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