Tata Chemicals has formed a joint venture with the Tanzanian government to set up a soda ash project in the south-eastern African country. The Lake Natron project, named after the waterbody from which soda ash will be extracted, will consolidate the Indian company's position as one of the three largest makers of the chemical globally.
Lake Natron is one of the world's few natural sources of soda ash; in most places, including India, it is produced chemically. It also lies on the same geographical belt of Kenya's Laka Magadi — another natural source of soda ash. Lake Magadi is also owned by Tata Chemicals through its UK-based subsidiary Brunner Mond. Soda ash is used in making glass, detergents and soaps.
Tata Chemicals has already commissioned a Tanzanian consulting firm to conduct an environmental and social assessment study at Lake Natron. The initial capacity will be up to 500,000 tonne a year, with an option to increase it later. Though financial details are yet to be ascertained, industry analysts put the initial investment at a minimum of Rs300 crore. Tata Chemicals, though, will have to invest more in infrastructure.
"It is an undeveloped region, just 40 km away from Lake Magadi. It doesn't have rails or roads," Tata Chemicals managing director Homi Khusrokhan told ET. "The project is at an early stage. After the environment study, we have to hold public meetings to discuss infrastructure development," he added. The JV will be called Lake Natron Resources, with Tata Chemicals taking the majority stake.
The Tata Chemicals stock was up 1.3 per cent at Rs244.5 on the BSE on Friday. The Sensex was down 0.22 per cent. Sources say that the project, when completed, will include a soda ash extraction and processing plant and transportation facilities to link the product to the market.
They added that the investment in the project might be part of the $1 billion lined up by the company for the next three years. Though not commenting specifically on the Tanzanian project, Khusrokhan did confirm that the money will be used for expansion plans, including overseas acquisitions and setting up several greenfield projects.
Tata Chemicals produces almost 3 million tonne of soda ash per year. Almost 1.6 million tonne comes from Brunner Mond, which Tata Chemicals acquired in late 2005. Brunner Mond has facilities in the UK, Netherlands and Kenya. About 40 per cent of the company's near-Rs6,000 crore revenue comes from the chemicals business and the rest from fertilisers. The Tanzanian government is hoping to develop the region and create jobs from the project.
But observers note that results of the environmental studies will be crucial to the project. Lake Natron is a Ramsar site. The Convention on Wetlands, signed in Ramsar, Iran, 1971, is an inter-governmental treaty that provides the framework for national action and international cooperation for the conservation and wise use of wetlands and their resources.