India is looking to acquire a 20 to 25-per cent stake in Belarus-based Belaruskali, one of the largest producers and suppliers of potash in the world, in a deal that could be worth $6-7 billion.
The government could either acquire the stake by itself or make a joint bid with a consortium of private fertiliser companies, the Mint reported, quoting ministry officials, on Wednesday.
The proposal is likely to be discussed at a meeting chaired by prime minister Manmohan Singh later in the day today, the paper said.
The report said the Belarus government had valued Belaruskali, which jointly owns Belarusian Potash Co with Russia's Uralkali, at $30 billion.
India needs to ensure long-term supplies of the fertiliser to cope with increasing demand, but could face competition for the Belarus company stake from rivals based in Russia and China.
Agriculture Minister Sharad Pawar had pressed the Prime Minister in a letter on 1 August 2011, saying the country needs to acquire stakes in foreign fertiliser companies to ''secure steady supplies of fertilisers at reasonable prices''.
Pawar argued that India needs to explore the prospects for partnerships and acquisitions of major potash sources in the world.
''A suggestion has been made to take proactive steps for acquiring such mines / companies through a consortium of Indian companies with government support,'' the letter said.
Manoj Kumar Bharti, India's ambassador to Belarus, met Belarusian prime minister Mikhail Myasnikovich to discuss the proposal on 4 August.
On 3 August Russia's largest bank OAO Sberbank acquired a 35-per cent stake in Belaruskali as collateral for a $2-billion loan it had extended to Belarus along with Deutsche Bank AG.
Belaruskali is owned by the government of Belarus, which has been hit by a severe current account deficit that led to its currency being devalued by 36 per cent in May.
The government could either acquire the stake itself or make a joint bid with a consortium of private fertiliser companies, said one of the two ministry officials cited earlier.
''The most important thing is the valuation. We do not want to buy an asset that is overvalued,'' this official said.
The present domestic demand for muriate of potash (MoP) stands at about 5 million tonnes, all of which is imported.
According to the fertiliser ministry's figures, India is likely to import 2.1-2.2 MT of the commodity this year, less than half the projected demand. A note prepared ahead of the 10 August meeting says that MoP could not be imported ''due to cartelisation of international suppliers''.
Today's meeting is also likely to discuss the fertiliser shortages issues in the country.
Pawar said in his letter to the Prime Minister that ''since requirement for foodgrains, fruits and vegetables, oilseeds, millets and other crops is steadily increasing, demand for fertiliaers will increase and will have to be met either through domestic production or imports, if we are to maintain growth momentum in agriculture and ensure food security''.
The agriculture minister's letter also noted that ''skewed distribution of good quality phosphate and potash sources in the world have encouraged tendency towards cartelisation among major suppliers''.
This was largely responsible for India's fertiliser subsidy bill touching Rs1 trillion in 2008-09, he said.