German company DIAG Industries GmbH has submitted a detailed project report (DPR), along with estimated investment requirements, to the Office of the Investment Board Nepal (OIBN) for establishing a chemical fertilizer plant in the country. According to the report, the plant will produce two types of chemical fertilizers—urea and ammonium nitrate—through three different processes: natural gas, electrolysis and a hybrid method. The hybrid process would enable the production of both urea and ammonium nitrate simultaneously.

The project aims to replace Nepal’s fertilizer imports and reduce the country’s dependence on costly foreign supplies. The plant is expected to come into operation by 2028, according to information posted on the DIAG website. OIBN and the German firm had signed a memorandum of understanding (MoU) two years ago to prepare the DPR for the project. The 50th Board meeting of OIBN, held on 31 March 2022, decided to issue a survey license to DIAG based on its unsolicited proposal. As per the MoU, the company was required to submit the DPR within two years of receiving the license.

During the study, DIAG was asked to propose the most suitable technology—natural gas, electrolysis with carbon capture and storage, or a hybrid model combining both—for producing at least 700,000 tons of chemical fertilizers annually. The company has proposed to build the plant under a public–private partnership (PPP) model, with construction expected to take three and a half years.

As Nepal currently meets all of its fertilizer demand through imports, the crucial farm input often faces shortages during planting season due to supply constraints. The country’s annual demand for chemical fertilizers is estimated at around 700,000 tons. The government has allocated Rs 28.82bn in subsidies to procure 600,000 tons in the current fiscal year.

The German company has proposed to set up the plant at Bardaghat in Sarawal Rural Municipality, Nawalparasi West. The facility will cover 161.87 hectares and operate under the name DIAG Surya Green Fertilizer Pvt Ltd. According to an OIBN official, DIAG has estimated total investment at Rs 240bn.

The company has also outlined certain conditions, including a five-year tax holiday, a three-and-a-half-year construction period, guaranteed supply of 300 MW of electricity and the right to operate the plant for 30 years, among others.