By AK Luke, IAS (Retd)*
While returning from a Board meeting of the Oil India Limited (OIL) in Ahmedabad some time in 2012, two officers of the Gujarat State Fertilizers and Chemicals Ltd (GSFC), Nanavaty and Patel,  saw me off at the airport. They said they were proceeding to Canada in connection with a project GSFC had entered into with a company there. As we were running late, I hastily wished them the best.


Later, it appeared that the company was Karnalyte Ltd and it was for a potash mining project in Canada. Sanjiv Varma, the officer dealing with the project, later told me over phone that the entire GSFC contribution of Rs 250 crore had been transferred to the project in Canada (GSFC had stated in a notice that Varma would answer all queries on this project and provided his number). I thought this odd as such contributions are normally in stages matching project progress.


Even odder was GSFC going in for a mining project when potash was readily available in the international market; in my time in GSFC no shortage of potash was faced. GSFC had never tied up for such backward integration of raw material except when, again in my time (2003-06), we took a small equity for Rs 25 crore, if my memory serves me right, with Groupe Chimique Tunisian (GCT) of Tunisia for phosphoric acid. Its production was mainly confined to Morocco and Tunisia, and as position was tight at times, we imported it in large quantities.

 Did GSFC, acting speedily, ensure the return of its Rs 250 crore? If so, it is to be complimented. If not, a deeper probe is called for

Our potash requirement was never so large as to justify a backward integration investment in a distant land. I continued tracking the project for a short time over the net, as Karnalyte was reporting on its status presumably as per Canadian law. GSFC was silent on its sites. I then lost interest. A month back I saw the Karanlyte shares which the GSFC had purchased for Canadian $ 8.15 had come down to  $ 0.2 per share, today it is $ 0.17. Effectively the GSFC investment of Rs 250 crore buying 5.19 million shares at Canadian $ 8.15 per share has come down to approximately Rs 6 crore, a diminution of approximately 98% .

From the Karnalyte site it appears the project itself may not have come up. Strangely, three GSFC officials are shown as Directors of Karnanlyte. It also appears GSFC was planning to further provide backup finance to this project for $700 million. This apparently did not happen, the only saving grace in the entire saga.


As the project for which the Rs 250 crore was invested by GSFC does not appear to have come up, it is possible GSFC, acting speedily, ensured the return of its Rs 250 crore. If so, it is to be complimented. If not, a deeper probe is called for.


All the material for this piece is from open domain sites mentioned below and none are from any source within GSFC, except where explicitly stated above. My two recent e-mails to GSFC asking for details are not yet answered.

References:

  1. https://www.livemint.com/Companies/V1amJHhe5WuseY13z7qGFO/GSFC-to-buy-20-in-Canadas-Karnalyte.html
  2. https://www.google.com/search?q=karnalyte+resources+inc+share+price&rlz=1C1CHBD_enIN853IN853&oq=Karnalyte&aqs=chrome.1.0l7j69i61.8190j1j7&sourceid=chrome&ie=UTF-8
  3. http://karnalyte.com/news/press-releases/karnalyte-resources-inc-announces-2019-third-quarter-results/
  4. https://www.prnewswire.com/in/news-releases/karnalyte-resources-inc-announces-agreement-in-principle-for-approximately-700-million-usd-in-financing-for-phase-1-potash-mine-and-spin-out-of-secondary-mineral-assets-and-unexplored-lands-571990241.html

*Ex-managing-director, GSFC (2003-06)SHARE

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