Big Loan Taken By Indian Fertiliser Industry? What Has Gone Wrong?

The Indian fertiliser industry, crucial for the country’s agricultural yield and food security, is entering a new chapter of strategic expansion. A landmark development in this arena is the execution by Coal India Limited (CIL) of a Sponsor Support Undertaking (SSU) for its joint-venture partner Talcher Fertilizers Limited (TFL). 

This commitment is made in connection with a massive ₹12,250 crore rupee term loan facility for TFL’s coal-gasification-based fertiliser plant at Talcher, Odisha. While the support does not render CIL financially liable as a guarantor, the strategic implications for the fertiliser sector and India’s self-sufficiency agenda are profound. 

This article examines the key contours of the SSU, the background of the TFL project, the implications for the fertiliser sector, and what challenges and opportunities lie ahead.

SSU by Coal India Limited: What it means

On 18 October 2025, Coal India Limited formally filed a disclosure under the Securities and Exchange Board of India (SEBI)’s Listing Obligations and Disclosure Requirements (LODR) Regulations. It announced that as one of the promoters of Talcher Fertilizers Limited, it had executed the Sponsor Support Undertaking which is a pre-condition for the lenders to disburse the nearly ₹12,250 crore term loan.

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Important aspects:
 

• The SSU is not a guarantee. CIL clarifies that it is not the guarantor of the facility and has no direct financial implications arising from the undertaking.
   
• The undertaking is aimed at supporting the revival of the erstwhile Fertilizer Corporation of India Limited’s Talcher unit by setting up a new coal-gasification-based fertiliser plant under TFL.
   
• The loan facility is large in scale (₹12,250 crore) and marks a significant investment in downstream fertiliser capacity tied to indigenous coal gasification.
   

In essence, while CIL is aligning with the project as a promoter and lends its weight via the SSU, it treads carefully to delineate its exposure. For stakeholders, this means increased visibility of the project and stronger backing, yet with structured risk boundaries.

Project overview: Talcher Fertilizers Limited

TFL is a joint venture incorporated on 13 November 2015. Its promoter mix includes Coal India Limited (CIL), GAIL (India) Limited (GAIL), Rashtriya Chemicals & Fertilizers Ltd. (RCF) and FCIL (with a minority stake). The strategic objective is to set up a fertiliser plant based on coal gasification technology at the Talcher site in Odisha, the site of the former FCIL unit.

Key project features:
 

• The plant is designed to use indigenous high-ash coal (via gasification) to produce syngas, which is then converted into ammonia and urea.
   
• As per rating agency commentary, the capacity is projected at around 1.27 million metric tons per annum (MMTPA) of urea (via a 2,200 MTPD ammonia plant + 3,850 MTPD urea plant).
   
• The project cost has escalated: originally estimated around ₹13,277 crore, then ₹17,081 crore, and now reportedly in the range of about ₹19,000 crore in revised form.
   
• Commissioning has been delayed: Initially scheduled for June 2024 was the target; current revised estimates place it at end-2027 (or December 2027) for commencement of commercial operations.
   

Below is a table summarising the major specifications of the TFL project:

Table 1: Key Project Specifications of TFL
 

This table captures the scale and strategic design of the TFL initiative.

In conclusion of this section: the project is ambitious, technologically advanced for India’s fertiliser sector, and positioned to reduce dependence on imported natural gas or urea. However, it carries execution risks given cost and time overruns.

Why the SSU and what sectoral significance does it carry?

The execution of the SSU by CIL is meaningful not just for this single project, but for the broader fertiliser ecosystem in India. Several factors underscore this:
 

1. Feedstock and self-reliance: The use of Indian coal (especially as CIL can supply via long-term coal supply agreements) reduces reliance on imported feedstock or natural gas. Rating agencies highlight that a Fuel Supply Agreement (FSA) with CIL for 3 MMT of coal (meeting full requirement) is in place, reducing a major execution risk.
    
2. Technology leap: Coal-gasification‐based fertiliser plants are relatively rare in India; the TFL scheme is positioned as a strategic “first mover” in that sense. The government’s policymaking signals the importance of this technology route.
    
3. Domestic capacity addition and import substitution: India’s urea demand continues to grow steadily; increasing domestic capacity via projects like TFL helps reduce imports and strengthen supply security.
    
4. Risk mitigation through promoter support: The SSU provides lenders comfort that promoters are committed to equity infusions, cost-overrun support, and timely execution. Rating commentary emphasises that the promoter profile (CIL, GAIL, RCF) is strong and supportive.
    

Thus, the SSU is more than a legal formality, it signals promoter seriousness, enhances credibility of the debt funding, and underpins the strategic importance of the TFL project in India’s fertiliser roadmap.

Financial and execution challenges: A sober appraisal

Despite the strategic promise, the TFL project also faces significant risks, which are worth analysing in detail, particularly given the magnitude of investment and the complexity of the technology.

Table 2: Selected Key Risks and Mitigations
 

This table outlines the principal execution and financial risks alongside current mitigation efforts.

In summary: while the fundamentals of the project are robust, strong promoter profile, strategic importance, policy tailwinds, the magnitude of cost and schedule risk cannot be under-estimated. Stakeholders will need to monitor progress closely, including debt tie-ups, equity infusion, contractor performance, and feedstock supply stability.

Broader implications for India’s fertiliser and energy transition agenda

The significance of the TFL project, backed by the SSU from CIL and other promoters, extends into multiple domains:

• Agricultural productivity and fertiliser security: By increasing urea capacity domestically, India can better ensure supply to its large farming base. This is particularly important given volatility in global fertiliser markets and geopolitical dependency for feedstocks.
   
• Utilisation of indigenous coal reserves: India's vast coal reserves stand to find downstream value instead of purely thermal power use. This aligns with broader policy themes of coal-use diversification and reduces reliance on imported gas.
   
• Decarbonisation and technology readiness: While coal-based processes are often viewed as carbon-intensive, the coal gasification route is a cleaner variant compared to traditional processes. The TFL project could serve as a template for future coal-gasification for fuels, chemicals and polymers. Rating commentary highlights this strategic aspect.
   
• Financial market signals: The fact that lenders are willing to support ₹12,250 crore loan and promoters provide SSU signals confidence in the fertiliser sector’s future. It opens the door for further ambitious investments in the sector.
   
• Geo-strategic and import substitution benefits: Reduced dependence on imported urea or natural gas strengthens India’s energy and agricultural resilience in a volatile global environment.
   

Thus, the implications go well beyond one plant, this is a strategic node in India’s industrial, agricultural, energy and climate policy tapestry.

Conclusion

The execution of the Sponsor Support Undertaking by Coal India Limited for Talcher Fertilizers Limited’s ₹12,250 crore loan facility marks a major step in India’s fertiliser and industrial strategy. While CIL has taken on a supportive role rather than outright guarantee, its participation enhances the credibility of the project. The TFL coal-gasification-based fertiliser plant is poised to deliver significant benefits: boost domestic urea capacity, leverage indigenous coal, reduce import dependency, and pioneer technologically advanced processes in the fertiliser domain.

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That said, the road ahead is non-trivial. Cost escalations, delayed commissioning, technological and regulatory risks remain material. Execution discipline, consistent equity infusion, seamless feedstock supply, and supportive policy implementation will be decisive. If successful, however, TFL could not only transform fertiliser production but also herald a new era of strategic industrial infrastructure tied to India’s self-reliance and low-carbon transition goals.