Nagarjuna Fertilisers and Chemicals Limited (NFCL), India’s second largest urea player overall by volume, has started work on its third plant at Kakinada in Andhra Pradesh.

This new facility will enhance the overall urea production of NFCL by 1.3 million tonne to take the total production capacity to 2.9 million tonne per annum.

NFCL, as part of the EPC contract, has awarded early work order to Technimont of Italy. The cost of expansion is about Rs 4,500 crore, which will be financed through a mix of debt and equity, the company said.

The policy provides floor and ceiling price mechanism with an assured return of 12 per cent to 20 per cent on equity. The policy also provides compensation for variation in the cost of input gas.

With a new LNG terminal proposed at Kakinada Port, NFCL would be able to utilise LNG through this terminal. The present policy provides for priority allocation of natural gas to the fertiliser sector. NFCL, due to its location, would have an advantage in terms of availability of gas as well as economy in transport cost.

Environmental approval, allocation of water and contracts for natural gas are complete and the company expects to be the first in the country to complete its brown field expansion and start production. NFCL commissioned its first plant in 1991 and the capacity was doubled with the second plant in 1997. Both plants were revamped in 2007 resulting in an increase in capacity, the company said.