PM Oli Revives Fertilizer Plant Plan, Nepal Oil Corporation Keen on IOC Partnership

Prime Minister KP Sharma Oli has once again shown interest in establishing a domestic fertilizer plant, as the country continues to struggle with recurring shortages of chemical fertilizers during the peak farming season.

On Tuesday, Oli held discussions with Agriculture and Livestock Development Minister Ramnath Adhikari and Industry, Commerce, and Supplies Minister Damodar Bhandari, directing them to prepare a detailed plan for the plant.

Following the instruction, Minister Bhandari convened a meeting on Wednesday with officials from the Department of Industry, Nepal Oil Corporation (NOC), Agricultural Inputs Company, and private sector representatives to assess fertilizer demand, production feasibility, investment models, and technology options.

IOC Partnership and Private Sector Involvement

According to NOC officials, the plant could be developed in collaboration with the Indian Oil Corporation (IOC). Representatives from Chaudhary Group (CG) suggested a public–private partnership (PPP) model for its establishment.

“A plant requiring more than NPR 100 billion in investment could ensure adequate production, but it must also be designed with an export model to avoid losses,” an official present in the discussion said.

NOC Executive Director Chandika Prasad Bhatt confirmed the corporation’s willingness, stating:

“Nepal alone cannot sustain such a project. A strategic partner is needed to guarantee offtake. IOC is ready to invest, and if the government moves ahead, NOC will also join.”

He added that natural gas-based production could be viable, pointing to preliminary studies in Dailekh that estimate reserves of 112 billion cubic meters of natural gas.

A Long-Delayed Proposal

The fertilizer plant plan is not new. Since the 1980s, successive governments have raised the issue whenever fertilizer shortages emerge, but momentum has often faded once the immediate crisis subsides.

• In 1984 (2041 B.S.), the Japan International Cooperation Agency (JICA) conducted a study but concluded that high operational costs and marketing challenges made the project unfeasible.
• In 2020 (2077 B.S.), a taskforce led by then Agriculture Secretary Rajendra Bhari submitted a preliminary report suggesting the project was technically possible.
• Later that year, the Cabinet formed a high-level committee led by then Finance Minister Bishnu Poudel, with ministers Lekharaj Bhatta and Padma Kumari Aryal as members. The committee recommended a natural gas-based plant with an estimated cost of NPR 103 billion.
• By March 2021 (Chaitra 2077 B.S.), the Cabinet approved the proposal under a PPP model, assigning the Investment Board Nepal to oversee implementation.

A German consultancy, DIAG Industries GmbH, later suggested options including natural gas and water electrolysis technologies, with total costs projected at NPR 150 billion for a facility capable of producing 700,000 metric tons annually.

Rising Import Bills

Nepal spends billions of rupees annually on fertilizer imports.

• In FY 2022/23 (2079/80), imports cost NPR 31.01 billion
• In FY 2023/24 (2080/81), NPR 24.34 billion
• In FY 2024/25 (2081/82), NPR 27.95 billion

For the current FY 2025/26 (2082/83), the government has allocated NPR 28.82 billion for fertilizer imports.

Despite this, farmers frequently face shortages, particularly during rice planting season.

According to the Ministry of Agriculture, Nepal requires about 1.3 million metric tons of fertilizer annually, but only 600,000 tons are planned for import this fiscal year. Officials say heavy subsidies make it difficult for the government to meet demand within the allocated budget.