Rabi Lamichhane Returns to Nepal After Three-Day India Visit

Kathmandu. National Independent Party (NIP) Chairman Rabi Lamichhane has returned home after completing his three-day visit to India. This is his first official visit to India as the chairman of the largest party after the formation of the government with the sole majority of the National Independent Party. During this, he held meetings with Indian Prime Minister Narendra Modi and ruling Bharatiya Janata Party President Nitin Naveen among others. 

Earlier, through his article published in the Indian newspaper 'Hindustan Times', he has proposed the establishment of a joint chemical fertilizer factory in the border area between Nepal and India. Lamichhane himself has called this 'development diplomacy'. 

He stated that Nepal-India relations should be given a new direction on the basis of this diplomacy. He mentioned that immediate cooperation between the two countries is necessary to solve the perennial severe shortage of chemical fertilizers faced by Nepali farmers in the long term. 

Inspired by the industrial infrastructure of India's Gujarat state, he mentioned in the article that establishing such a factory in the border area would contribute to the economies of both countries and play a decisive role in increasing agricultural productivity. 

Fertilizer Factory: The First Step of Development Diplomacy

The issue of a fertilizer factory has been discussed in Nepal for a long time. Every year, discussions about it intensify as the monsoon begins. Discussions also arise before the budget statement regarding the large subsidy allocated. However, so far, this issue has remained impractical from both technical and economic perspectives. 

Biraj Singh Thapa, Associate Professor at Kathmandu University, states that there are two methods for producing urea, the most commonly used chemical fertilizer. First, by splitting water, and second, by using natural gas. 

According to the first method, water is split into hydrogen and oxygen through chemical reactions. This is mixed with nitrogen from the air to produce ammonia. When this is mixed with carbon dioxide and subjected to a chemical reaction, urea fertilizer is formed. This is called electrolysis technology. 

In the method using natural gas, methane (CH4) is broken down into carbon and hydrogen. The hydrogen produced is mixed with nitrogen to form ammonia. When this is mixed with carbon dioxide, urea fertilizer is formed. 

Here, methane gas is primarily needed to produce urea. Gases emitted from industries that release a lot of carbon dioxide, such as cement and steel industries, are mixed with it to produce urea. He states that with 55 cement industries currently in Nepal, this can also help reduce the impact of greenhouse gas emissions. 

Dr. Thapa mentions that most countries in the world currently produce urea from natural gas. However, Paraguay has started producing fertilizer using the water-splitting method. 

Which Method is Suitable for Nepal?

Associate Professor Thapa, who is also the head of the Green Hydrogen Lab, states that the water-splitting method (electrolysis method) is the most suitable and sustainable for establishing a chemical fertilizer factory in Nepal. 

In a conversation with Ratopati, he said that there is no alternative to producing urea fertilizer by using domestic electricity to produce hydrogen and ammonia to end the long-standing fertilizer crisis in Nepal. He mentions that since it costs around 30 units of electricity to produce one kilogram of hydrogen, it will be easy to utilize the electricity that goes to waste during the monsoon season. 

He states that although the method of producing hydrogen from natural gas is easy, it is not convenient for Nepal. Thapa says that obtaining natural gas in Nepal is very costly, making it comparatively less cost-effective. He claims that as the world moves towards green energy, the future lies in green hydrogen. 

Need for India's Cooperation in Fertilizer Factory 

However, Nepal alone is less likely to be able to establish a fertilizer factory. There are two reasons for this. First, lack of investment, and second, market access. 

Even if favorable conditions are created for opening a fertilizer factory in Nepal, it requires huge investment. Although it is possible to build a factory for 50 billion to 100 billion rupees technically, a large volume of production is necessary to make it cost-effective. India can be a major investor for this. 

However, Thapa says there is no need to worry about the investment itself. Thapa states that if favorable conditions are created, investors from around the world are ready to invest trillions of dollars. There are revolving funds for large projects in the global market. With the global pressure of climate change, funds investing in fossil fuels are being diverted towards green energy. 

He mentions that with mandatory international standards like carbon penalty tax coming into effect after 2028, this will add even greater potential. 

This means that industries emitting carbon will have to pay a penalty, and that money will be mandatorily invested in green energy infrastructure. Therefore, he says that investors are looking for green energy projects, and Nepal needs to create a suitable and legally secure investment framework to attract them. 

More importantly, it is the market. According to the Ministry of Agriculture's estimate, Dr. Ramkrishna Shrestha, Joint Secretary and Head of the Agricultural Development Division, states that to operate a fertilizer factory in Nepal profitably, at least 3 million metric tons of fertilizer must be produced annually. However, the annual requirement of fertilizer for Nepal is only 1.2 to 1.4 million metric tons. Therefore, a cost-effective industry must be export-oriented. 

India itself is a net importer of chemical fertilizers. Therefore, a supply of cheap and easily available fertilizer is also necessary for India. However, to provide market access for fertilizers produced in Nepal, diplomatic relations must be strong.

Although India has sufficient electricity supply now, electricity produced from projects developed by foreign investors and contractors other than India is not permitted in India. He states that without harmonious diplomatic relations with India, the market for fertilizers produced in this manner will have difficulty gaining easy access, making harmonious relations with India essential. 

An Unfulfilled Dream for Four Decades

The discussion about opening a fertilizer factory in Nepal is 40 years old. The Japan International Cooperation Agency (JICA) conducted the first study in 2041 BS (1984 AD). Since then, this issue has been included in the policies, programs, and budgets of every government but has not been implemented. 

The task force formed under the coordination of the then Finance Minister Bishnu Poudel submitted a report estimating the cost of a natural gas-based factory at approximately 103 billion rupees. Last year in Jestha (May/June), the Investment Board meeting decided to form a task force to review the report of Germany's 'DIIAG Industrie GmbH'. 

However, due to the political fluctuations in Bhadra (August/September) and the 'Gen Z movement', the political course changed entirely. The issue has been discussed again with the new government. 

Producing DAP is More Difficult than Urea 

The management of raw materials and safety sensitivity required for fertilizer production is another complex issue. According to the ministry, raw materials like ammonia required for urea production and rock phosphate and sulfuric acid required for DAP are not fully available in Nepal. 

Although limestone is found in small quantities domestically, other chemical elements have to be imported, which can always put the raw material supply chain at risk. Furthermore, the production, storage, and transportation of ammonia gas are extremely sensitive and risky tasks, requiring a high-level security mechanism and skilled technical manpower. The ministry understands that even a small lapse in security can lead to a major accident. 

According to a high-ranking official from the ministry, the government is moving forward with various 'investment modalities' and technical studies through the Investment Board for the establishment of a chemical fertilizer factory in Nepal. The ministry official states that if clarity in policies such as land acquisition, environmental impact assessment, and attracting the private sector can be achieved, this project is not impossible in Nepal. 

In this situation, if Lamichhane's development diplomacy works, stakeholders say it will be possible to transform Nepal from an import-dependent country to a net exporting country within a few years.