Bangladesh
Ex-post Monitoring of Completed ODA Loan Project“Energy Saving, Environmental Protection and Improvement of On-stream Factorof Ghorasal Urea Fertilizer Factory”
External Evaluator: Kenichi Inazawa(Office Mikage, LLC)
Field Survey: Sep-Oct 2009
1. Project Description

Map of the Project Area

Ghorasal Urea Fertilizer Factory

1.1 Project Objective
The objectives of the project were to improve the energy efficiency and prevent
ammonia leakage of Ghorasal Urea Fertilizer Factory located in the suburb of Dhaka, by
upgrading obsolete equipment that had not been upgraded before; thereby contributing to
the stable supply of the urea fertilizer and improvement of environment.
1.2 Outline of Loan Agreement
Loan Amount / Loan Disbursed
Amount

5,443 million yen/ 5,443 million yen

Loan Agreement

July, 1999 / November, 2001

/ Final Disbursement Date
Ex-post Evaluation

FY2003

Executing Agency

Bangladesh Chemical Industries Corporation(BCIC) (The Ghorasal Urea Fertilizer Factory is
in charge of the management and maintenanceworks of the project facilities.

Main Contractor (Over 1 billion

Toyo Engineering Corporation

yen)
1-1

Main

Consultant

(Over

100

N/A

million yen)
1.3 Background of Ex-Post Monitoring

At the time of ex-post evaluation (implemented in FY2003), there were problems
related to the development of facilities which were not covered by the project (problems
with the production process). As a result, the overall capacity utilization ratio of theGhorasal Urea Fertilizer Factory had not increased. The actual urea fertilizer production
was slightly lower than initially planned (approximately 80% of the planned level), giving
slight concerns about the effectiveness of the project. Furthermore, concerning
management and maintenance, the fertilizer factory was employing an inadequate
maintenance plan and stopgap approach to handling problems with equipment andmachinery. Financially, the retail price of urea fertilizer was being kept at a low,government-controlled price that did not reflect the production cost of the fertilizer,
causing the project to be in debt, and raising concerns about the financial sustainability ofthe project. Plant facilities and equipment were becoming increasingly obsolete and it wasthought that a thorough maintenance and inspection system was needed. Furthermore, it
was recommended that a cost analysis of fertilizer production and a revision of the retailprice system were necessary.
Given the above stated issues, this project was selected for ex-post monitoring, with theobjective of confirming the operational performance, future outlook and financial
improvement of plant facilities and equipment in the time following ex-post evaluation.
The project was reviewed based on each evaluation item through a new field survey, withthe goal of developing conclusions.
2. Monitoring Results
2.1 Effectiveness (Impact)
2.1.1 Quantitative Effects(1) Improvement of Energy Efficiency
As shown in Table 1 below, power generation per 1 Nm3 of natural gas has been in linewith initially planned levels (2.39kWh/Nm3 of natural gas) since the time of ex-post
evaluation. Furthermore, the thermal efficiency of generators has also been improving. Thismay be due to the stable power supply provided by the project continuing to produce
effects even after ex-post evaluation 1. On the other hand, both natural gas consumption
1

However, as of October 2009 the 18MW gas turbine power generator installed by the project wasundergoing repairs due to a mechanical breakdown. Currently the Ghorasal Urea Fertilizer Factory is
operating its plants using power supplied by the nearby Polash Urea Fertilizer Factory (just like the Ghorasal
Urea Fertilizer Factory, it is a urea fertilizer factory under the umbrella of the Bangladesh Chemical

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(Nm3) and cooling water consumption per 1 ton of urea produced are a little higher thanthey were at the time of ex-post evaluation. According to the Ghorasal Urea Fertilizer
Factory, this is because the number of shutdowns has increased since the time of ex-post
evaluation, and large amounts of natural gas and cooling water are necessary whenrestarting plants and for restoration work. The main reason for the increase in the numberof shutdowns, as was pointed out in the Ex-Post Evaluation Report, is that approximately
40 years have passed since the fertilizer factory commenced operations, meaning that all of
the equipment and machinery in the factory is becoming obsolete. Then, it has resulted in
the occurrence of an increasing number of malfunctions.
Table 1: Actual Value of Improvement of Energy Efficiency
At time of Ex-post Evaluation
Item
1999/00
2000/01
2001/02
1. Power Generation
Plan
2.39
(kWh/1 N m3 of Natural
2.67
Actual
1.73
1.73
Gas)
(111.7%)
2. Thermal Efficiency
Plan(not specified)at the Generating End
Actual
17.0
17.0
26.1
(%)
Plan
868
3.
NaturalGas
Consumption per 1 ton
1,116
of Urea Produced (N Actual
1,083
1,108
(77.8%)
m3 )4.
Cooling
Water
Plan
9.70
Consumption per 1 ton
14.40
Actual13.40
13.94
of Urea Produced (ton)(67.4%)
At time of Ex-post Monitoring
Item
2003/04
2004/05
2005/06
1. Power Generation
Plan
2.39
2.39
2.39
(kWh/1 N
m3
of
2.57
2.88
2.85
ActualNatural Gas)
(107.5%)(120.5%)(119.2%)
2. Thermal Efficiency
Plan(not specified)at the Generating End
Actual
25.27
28.34
27.97
(%)
Plan
868
868
868
3.
NaturalGas
Consumption per 1 ton
1,217
1,183
1,366
of Urea Produced (N Actual(71.3%)(73.4%)(63.5%)
3m )4.
Cooling
Water
Plan
9.70
9.70
9.70
Consumption per 1 ton
15.18
15.17
17.16
Actualof Urea Produced (ton)(63.9%)(64.0%)(56.5%)

2002/03
2.39
2.62(109.6%)
25.7
868
1,041
(83.4%)
9.70
13.01(74.6%)
2006/07
2.39
2.90(121.3%)
28.53
868
1,264
(68.7%)
9.70
14.92(65.0%)

Source: Ex-post Evaluation Report (at time of Ex-post Evaluation: Upper), Answers on Questionnaire (attime of Ex-post Monitoring: Lower)(2) Control of Ammonia Leakage
Industries Corporation, the executing agency for the project).

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At the time of ex-post evaluation, the observed value for the concentration of ammonia
in water subject to DOE standards 2 was 0.15-5.0 ppm in FY2002/2003. 3 The
concentration of ammonia in the atmosphere over the same time period ranged between
5.0-60.0 ppm, falling below the target of 45 ppm most of the time. At the time of ex-postmonitoring, the observed values for the concentration of ammonia in water andatmosphere subject to DOE standards have met the standards, as is shown in Table 2
below.
On the other hand, the values for the concentration of ammonia in water not subject to
DOE standards are observed to be high compared to the time of ex-post evaluation,4ranging toward the maximum values. The increase in the number of shutdowns resulted inlarge amounts of ammonia collecting in drain pipes, and these values were recorded
temporarily when those pipes were cleaned, flushing their contents into the facility’s
artificial lagoon. According to the explanation given by the fertilizer factory, normally theconcentration ranges between 200 ppm and 300 ppm, so this is not a big issue. Furthermore,just as at the time of ex-post evaluation, environmental monitoring of the artificial lagoon
is not subject to DOE standards and is considered to be one of the processes necessary incarrying out waste water treatment for the Sitalakhya River adjacent to the factory. For thisreason, no measures have been taken to reduce the ammonia concentration in the artificial
lagoon to a level acceptable to DOE standards. But before discharging to Sitalakhya river,
the water (lagoon outlet) is being diluted with fresh water to DOE standards.
Table 2: Environmental Monitoring Data
Item

Year
1999/00
2000/01
2001/02
2002/03
2003/04
2004/05
2005/06

Subject to DOE Standards
Ammonia
Concentrationin
Water(Monitoring
point:
50m downstream fromthe drain outlet fromthe artificial lagoon to
the river)
N/A
N/A
0.25-5.0
0.15-5.0
0.03-5.0
0.07-4.8
0.07-5.0

Ammonia
Concentration
Atmosphere(Monitoringurea plant)(unit: ppm)
Not Subject to DOE
Standards
Ammoniain Concentrationin
Water
point: (Monitoring point:
drain outlet to theartificial lagoon)

N/A
N/A
10.0-80.0
5.0-60.0
N/A
N/A
2.0-75.0 *Note2100-400
80-30050-27550-25072-1,820
110-1,860
152-1,902

The limits for the concentration of ammonia stipulated by the DOE (Department of Environment of
Bangladesh): 5 ppm or below for water and 50 ppm or below for the atmosphere.
3
The data indicate the range between the minimum and maximum values recorded each year.
4
The monitoring result in FY2002/03 was 50-250 ppm.

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2006/07
2007/080.08-5.0
0.18-5.0

2.0-12.0
2.0-8.0

159-2,171
142-1,802

Source: Executing Agency documents
Note) A maximum value of 75.0ppm was observed but according to the fertilizer factory this was caused byan emergency shutdown of the urea plant (on the day of the observation the remaining ammonia wasdischarged, so the observed amount of ammonia increased temporarily), and therefore this was an
exceptional case.

Figure1: Artificial Lagoon(adjacent to the fertilizer factory)

Figure 2: Ammonia Plant in the Fertilizer
Factory

Furthermore, there are not any particularly big problems regarding environmental
measures for the artificial lagoon, which was pointed out at the time of ex-post
evaluation.5 In this survey, it was confirmed that the Ghorasal Urea Fertilizer Factory
was handling the issue appropriately. For example, in the dry season when the amount ofwater in the lagoon decreases due to evaporation, the factory adds water to the lagoon toprevent it from giving off the odor of ammonia, and in the rainy season when the amountof water in the lagoon increases, the factory uses a drainage pump to discharge water
appropriately into the adjoining Sitalakhya River (adjusting the amount of water in theartificial lagoon). The factory also implements regular water quality monitoring for thelagoon (implemented once a week).
2.1.2 Impact(1) Improvements of Living, Social, and Living Environment in the Region (Beneficiary
Survey)Table 3 below shows the results of a beneficiary survey of residents living within 2-3
km of the Ghorasal Urea Fertilizer Factory.6 In general, no major changes are seen
compared to the beneficiary survey results at the time of ex-post evaluation, but a
5

The Ex-Post Evaluation Report stated, “in the dry season when the water level declines, the ammonia
concentration in water may increase and the evaporated ammonia may give off an odor. In the rainy season, on
the other hand, the excess water in the lagoon may flood adjacent areas, as has happened in the past.”
Environmental measures were proposed to reduce the impact on local residents.
6
The survey was conducted on the issue of “change compared to five years ago (= the change from the timeof ex-post evaluation).” 100 people were ramdomly selected. (=the sample size is 100.)1-5significant number of residents has reported that they still notice an ammonia odor,
indicating that concerns about health continue to exist.
Just as at the time of ex-post evaluation, the residents living on the north and northeast
side of the Ghorasal Urea Fertilizer Factory and artificial lagoon notice the ammonia odor
more and were more likely to be concerned about the environment impact of the factory
than residents in other areas. One reason for this is that these areas are adjacent to theartificial lagoon, but another reason is that monsoons from the south (in winter) andsouthwest (in summer) blow the odor of the fertilizer factory to the north and northeast,
so the residents in these areas notice the ammonia odor relatively more, and as a result
tended to have more concerns about the environment.
Table 3: Results of the Beneficiary Survey
A. Impact on the Environment
Question
1.DegreeofEnvironmental
Pollution(Degreeofenvironmental
pollution
from
Ghorasal
Urea
Fertilizer Factory)
2.DamagetoLivestock(animals
and fish) (multiple
answers)
3.Damage to Fish in
the Sitalakhya Riverand the Surrounding
Areas
4.Water Pollution in
the Sitalakhya Riverand the SurroundingAreas
5.Damage
Vegetation

to

Before Project
Completion%

Serious/Considerable

62

Some/A little

34

None

4

CattlePoultry

20
66

At time of
Ex-postEvaluation
Improved
Significantly
Improved toSome Extent
Deteriorated
to Some
Extent
No Change
CattlePoultry2
3
22

At time of
Ex-postMonitoring
Improved
Significantly
Improved toSome Extent
Deteriorated
to Some
Extent
No Change
CattlePoultry

Fish

95

Fish

20

Fish

Serious/Considerable

65

Serious/Considerable

9

Some/A little

19

Some/A little

39

None
Serious/Considerable

16

None
Serious/Considerable

52

69

%
39
59
0

45

Some/A Little

11

Some/A Little

47

None
Serious/Considerable

20

None
Improved
Significantly
Improved toSome Extent
None

8

70

Some/A Little

17

None

13

B. Impact on Human Health

1-6

42
39
19

Serious/Considerable
Some/A
LittleNone
Serious/Considerable
Some/A Little
None
Improved
Significantly
Improved toSome Extent
None

%
2
48
8
42
13
22
18
17
52
31
14
41
45
17
49
34

Before Project
Completion

Question
1.DegreeofAmmonia Odorthe2.Damage Condition
to Health due to theAmmonia Odor

SeriousSome/A little
None
Serious
To someextent/A little
None
-

%
57
41
2
35
65
0
-

At time of
Ex-postEvaluation
SeriousSome/A little
None
Serious
To someextent/A little
Little
None

%
3
67
30
4
43
51
2

At time of
Ex-postMonitoring
SeriousSome/A little
None
Serious
To someextent/A little
Little
None

%
26
55
19
6
49
45
0

Source: Results of Beneficiary Survey
Note: The left and center column shows results of the beneficiary survey implemented at the time of ex-post
evaluation. The right column shows the result of the beneficiary survey at this time.

(2) Improvement of Urea Fertilizer Production Capacity
Regarding actual urea fertilizer production and the capacity utilization ratio, as shownin Table 4, production is slightly lower than at the time of ex-post evaluation (average of
70%-80%). The number of annual operating days has been maintained at almost the samelevel as it was at the time of ex-post evaluation. As previously stated, the main reason for
actual urea fertilizer production being 70-80% of the planned value is the obsolescence offactory equipment and machinery, which leads to a large number of shutdowns, affecting
the ability of the production line to operate according to plan. According to a management
officer at the fertilizer factory, there have been a large number of shutdowns since thetime of ex-post evaluation7 and large-scale replacement and comprehensive renovation ofequipment and machinery are necessary for the factory.
In August 2007 a gas compressor, a key piece of equipment in the urea fertilizer
production process, was damaged in a fire. 8 Repair work on the gas compressor tookapproximately two years and ended in August 2009,9 but in the meantime the production
line was completely shut down. As a result, annual production in FY2007/2008 was 21.87
thousand tons, much lower than the previous year. Moreover, there was no urea fertilizer
production at all in FY2008/2009.10 At the time of this survey it was confirmed that the
repairs had been completed and the gas compressor and the production line wereoperating normally, causing the level of production of urea fertilizer to return to the level
7

There were 17 shutdowns in FY2005/06 and 20 shutdowns in FY2006/07. There were also two shutdowns
in FY2007/08. (A gas compressor was damaged in August 2007, resulting in the production line operating
only about 20 days. In other words, the number of shutdowns was “2 times/about 20 days.”) The fiscal year
in Bangladesh is from July to June the following year.
8
Regarding the cause of the fire, according to Ghorasal Urea Fertilizer Factory, “the precise cause isunknown, but some oil leaked out of the gas compressor and was somehow ignited (the cause of ignition is
unknown).”
9
It took a long time to complete repairs because the damaged gas compressor had to be dismantled and its
parts shipped overseas (to Malaysia, the United States, etc.).
10
During the production line shutdown, maintenance and inspections of the facilities and equipment werecarried out as usual.

1-7

before 2007.

Item
1. Urea
Production(ton/day)
2. Capacity
Utilization
Ratio* (%)
3. AnnualOperatingDays(operatingdays/year)
4. Annual
Production(thousand tons)
Item
1. Urea
Production(ton/day)
2. Capacity
Utilization
Ratio* (%)
3. AnnualOperatingDays(operatingdays/year)
4. Annual
Production(thousand tons)

Table 4: Data related to Urea Fertilizer Production
At time of Ex-Post Evaluation
1999/00
2000/01
2001/02
2002/03
Plan
1,422
1,422
Actual

1,146

1,107

1,132

1,168

Plan

-

-

100

100

Actual

80.59

77.85

79.61

82.14

Plan

-

-

330

330

Actual280.88276.70286.91(86.9%)

322.82(97.8%)

Plan

-

-

470
377
(80.2%)

Plan

470
324
321
306
(68.9%)
At time of Ex-Post Monitoring
2003/04
2004/05
2005/06
1,422
1,422
1,422

Actual

1,113

1,134

Plan

100

ActualActual

2006/07
1,422

2007/08
1,422

1,024

1,038

936

100

100

100

100

78.27

79.75

72.01

73.00

65.82

Plan

330

330

330

330

330

Actual295.21(89.5%)

308.31(93.6%)

264.68(80.2%)

320.48(97.1%)

23.37(7.1%)

470
329(69.9%)

470
350(74.5%)

470
271(57.7%)

470
333(70.8%)

470
22(4.7%)

Plan
ActualSource: Ex-post Evaluation Report (at time of Ex-post Evaluation: Upper), Answers on Questionnaire (attime of Ex-post Monitoring: Lower)*The value with parentheses under the “Actual” value indicates achievement degree against the “Plan”.
*Note) The definition and calculation method of Capacity Utilization Ratio (%) in this table are “(Actual
value of the urea production (ton/day) / Plan value of the urea production (ton/day)) × 100”.

1-8Figure 4: Shipment of the Urea Fertilizer

Figure 3: Work for Delivery of the
Urea Fertilizer (before being packed
in bags)(3) Actual Condition of Domestic Production and Supply of Urea Fertilizer
As shown in Table 5, the total domestic urea fertilizer supply in Bangladesh since thetime of ex-post evaluation is approximately 2.3 to 2.7 million tons per year. The domestic
production (total production for the six domestic fertilizer factories) is approximately 1.4
to 1.9 million tons per year. As shown in Table 5, domestic supply has been increasing alittle. This has been achieved by supplementing domestic production, which tends to be
insufficient, with imports. The fall in the FY2007/2008 production of the Ghorasal Urea
Fertilizer Factory, as stated above, was due to the influence of a production line stoppage
caused by damage to the gas compressor. As a result, there was a fall in domestic
production that year.
Table 5: Domestic Supply of Urea Fertilizer and Production

Item
Domestic
Production
Domestic Supply
ProductionatGhorasal
Urea
Fertilizer Factory
Import11(incl. KAFCO12)at Ghorasal Urea Fertilizer Factory(unit: 1,000 tons)
At time of
Ex-postAt time of Ex-post Monitoring
Evaluation
2001/0 2002/0 2003/0 2004/0 2005/0 2006/0 2007/0
2
3
4
5
6
7
8
1,546

2,057

1,982

1,878

1,730

1,817

1,477

2,066

2,239

2,324

2,523

2,451

2,528

2,763

324

377

329

350

271

333

22

520

182

342

645

721

711

1286

Source: Ex-post Evaluation Report and Executing Agency documents

The urea fertilizer import price ranges from Tk 21,000 to Tk 26,000/ton (and averages
Tk 25,000/ton). According to the management officers of the Executing Agency (theBangladesh Chemical Industries Corporation) and the fertilizer wholesalers, the higher
the volume of imports of urea fertilizer the more difficult the financial position of the
producers becomes (it is by purchasing the fertilizer at a higher price than the domestic
11“Import” includes a small amount of stocks from the previous year.
KAFCO (Karnaphuli Fertilizer Company) is an export-oriented joint venture corporation of foreign
capital located in Chittagong, Bangladesh’s second-largest city. The firm is an affiliated company of the
Bangladesh Chemical Industries Corporation, just over 40% owned by the Bangladesh Chemical Industries
Corporation and just over 30% owned by KAFCO Japan which was established with investments from Japan(JBIC, Marubeni Corporation and Chiyoda Corporation). KAFCO is required to sell fertilizer at the export
price even in Bangladesh because under a condition of the loan agreement it is required to export all of its
products.
12

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sales price13). Furthermore, domestically produced urea fertilizer has a good reputation
for its quality, so the demand is high in the fertilizer market of Bangladesh. It is expectedin the future that the market will be activated if production of urea fertilizer increases.
(4) Interview with Fertilizer Distributors
Table 6 below shows the results of the interview survey with the distributors(wholesalers) that handle urea fertilizer produced by the Ghorasal Urea Fertilizer
Factory.14 The results show that, just as at the time of ex-post evaluation, the urea
fertilizer produced by the fertilizer factory scored highly in meeting the demands of themarket, in quality, and in other categories.
Table 6: Results of the Interviews with Fertilizer Distributors
Question
1. Does UFFL urea fertilizer
meet the demands of the market(especially, in light of thefertilizer quality)?
2. Have urea fertilizer sales of
Ghorasal Urea Fertilizer Factory
increased since the ex-post
evaluation?
3. Has the number of employees
increased since the ex-post
evaluation?
4. What is your view of the
future trend in fertilizer use in
Bangladesh?
5. What do you think of theprice level of urea fertilizer ofGhorasal
Urea
Fertilizer
Factory?

AnswerYes, very
much: 9Yes, to someextent: 1

Yes,significantly
increased: 1

Yes, to some

No: 0

No: 6

extent: 3

Yes,significantly
increased: 1

Yes, to someextent: 3

No: 6

Promising: 10

Skeptical: 0Pessimistic: 0

High:1

Reasonable: 9

Low: 0Source: Results of the Interviews with Fertilizer Distributors (10 companies answered)

Furthermore, a simple interview survey for the farmers living in the area around theGhorasal Urea Fertilizer Factory (sample size of 17) was also conducted. More than
two-thirds of the respondents were actually using urea fertilizer from the Ghorasal Urea
Fertilizer Factory. All respondents stated that the quality of the fertilizer was “extremely
good.”
2.2 Sustainability
2.2.1 Operation and Maintenance Agency
13

For details refer to “Sustainability, (3) Financial Status for Operation and Maintenance”
The survey was conducted on the issue of “change compared to five years ago (= the change from thetime of ex-post evaluation).”

14

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2.2.1.1 Institutional Structure for Operation and Maintenance
Just as at the time of ex-post evaluation, the Executing Agency for the project is the
Bangladesh Chemical Industries Corporation, while the Ghorasal Urea Fertilizer Factory
is in charge of operating and maintaining the facilities. The Ghorasal Urea Fertilizer
Factory is a state-run fertilizer factory under the umbrella of the Bangladesh Chemical
Industries Corporation.15 As of September 2009, the Ghorasal Urea Fertilizer Factory has
922 employees. The factory is comprised of seven departments (the Operation
Department, the Maintenance Department, the Technical Department, the Commercial
Department, the Administration Department, the Finance and Accounting Department andthe Civil Engineering Department) which are led by the head of the factory (the Managing
Director).
One recent matter for concern is the increase in the number of employees who arequitting. According to the head of the factory, “a particularly large number of younger
employees are quitting.” The main reason for this is that the salary system for state-run
fertilizer factories like the Ghorasal Urea Fertilizer Factory is determined by thegovernment. Many young employees leave because they do not feel that the salary system
is attractive (the salary level is low compared to private sector companies16).
Another matter for concern is that nearly all of the members of management are toreach mandatory retirement within two years17 and there are no officers in the younger
generation that can be promoted to manager in that time (for the reasons that there are notmany to begin with, and that those who would have been eligible had already quit).
According to management officers, “The employee distribution structure has been
affected18 and there is the possibility that if this problem is not resolved within two years,
the factory will have a hard time continuing on.”Finally, the “Quality Control and Environmental Pollution Control Section” which wasestablished with the objective of preventing ammonia leakage, is comprised of andoperated by highly experienced employees, just as it was at the time of ex-post
evaluation.19 This section is a lower branch of the Technical Department of the Ghorasal
15

There are six fertilizer factories, including the Ghorasal Urea Fertilizer Factory, under the umbrella of the
Bangladesh Chemical Industries Corporation. All of them are state-run fertilizer factories. In addition, theBCIC has a paper-manufacturing company and a cement-manufacturing company.
16
According to the management officers of the fertilizer factory, the salary level at the Ghorasal Urea
Fertilizer Factory is approximately one-fifth that of the private fertilizer company, KAFCO.
17
The mandatory retirement age is 57 years old. Personnel systems are also determined by government
regulations.
18
According to the interview result, “in the 1970s and the first half of the 1980s there were large profits
from fertilizer sales and the salary system was attractive, so many people came to work at the factory.
However, since around the middle of the 1980s salaries have become gradually less attractive compared to
private sector companies, while at the same time no major changes have been made to the salary system. As
a result, imbalances have arisen between the number (work class) of employees that joined the factory in the
1970s and the first half of the 1980s and those that have joined since about the middle of the 1980s.”
19
However, the head of this organization, the Deputy Chief Chemist, quit in 2008, and his post is still

1-11

Urea Fertilizer Factory, and has 33 employees as of September 2009.
2.2.1.2 Technical Capacities for Operation and Maintenance
There are no problems related to the plant’s technical capacities. The Technical
Department of the Ghorasal Urea Fertilizer Factory is in charge of personnel educationand training programs for employees. In FY2006/2007 a total of 19 educational andtraining programs were implemented (over a total of approximately 346 days;
approximately 58 employees participated in these programs), and in FY2007/2008 a totalof 11 education and training programs were implemented (over a total of approximately
220 days; approximately 40 employees participated in these programs). Just as at the timeof ex-post evaluation, most education and training are carried out by TICI.20 There is notmuch education oriented toward management due to budgetary constraints.
Training through OJT is also being implemented. In the case of new employees, after
they receive three months of education at TICI, they also receive OJT training in three
departments in the Ghorasal Urea Fertilizer Factory for a total period of nine months of
OJT training. (After training they are deployed to the department which they were judged
to be most suitable for during OJT.)
2.2.1.3 Financial Status(1) Operating Income and Operating Costs
Changes in the sales volume of urea fertilizer and operating costs since the time of
ex-post evaluation follow:
・Sales Volume of Urea Fertilizer: As shown in Table 7, the sales volume of urea fertilizer
was 306,514 tons in FY2006/2007, almost the same level as the time when the project
was completed. However, in FY2007/2008 it was much lower at 67,301 tons. The reason
for this, as stated above, is the shutdown of the production line due to a gas compressor
fire in August 2007, which meant that in that fiscal year the production line was actuallyoperating for only about 20 days, resulting in a much lower production level.
・Sales Income: Since the time of ex-post evaluation, the urea fertilizer price (the retailprice) has continued to be controlled at Tk 4,800/ton, so sales income has been entirely
dependent on sales volume. The reason for the fall in sales income in FY2007/2008 was
the shutdown of the production line noted above. However, in June 2008 the retail price
was revised to Tk 10,000/ton. As a result, it is highly likely that factory income will

vacant. The factory is currently trying to recruit a suitable person for the post who is highly experienced andhas outstanding management skills.
20
TICI (Training Institute of Chemical Industries) is a governmental education and training organization
under BCIC. It mainly provides education and training in the chemical and industrial fields. Its educational
facility is adjacent to the site of the Ghorasal Urea Fertilizer Factory.

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increase going forward. It is explained under “(2) Financial Status of Ghorasal Urea
Fertilizer Factory” on the next page for more details.
・Production Cost: The production cost per 1 ton has risen further since the time of
ex-post evaluation as a result of rises in the cost of raw materials, natural gas, personnel
expenses and packing material expenses. The production cost per 1 ton in FY2006/2007
was Tk 6,862 and the operating cost per 1 ton was Tk 7,450.21
Table 7: Operating Income and Operating Costs
At time of Ex-post Evaluation
Item
1999/00
2000/01
2001/02
2002/03
1. Sales Volume of
Urea Fertilizer
324,634
328,678
303,334
350,809(ton/year)
2.
Urea
Price
(Wholesale Price)
4,816
4,804
4,801
4,800
(Tk/ton)
3. Sales Income
1,562,941
1,578,819
1,456,256
1,683,885(1,000Tk/year)
4. Operation costs
1,943,940
2,023,062
2,087,363
2,068,773(1,000Tk/year)
5. Operating Profit(380,999)(444,243)(631,107)(384,888)(1,000Tk/year)
At time of Ex-post Monitoring
Item
2003/04
2004/05
2005/06
2006/07
1. Sales Volume of
Urea Fertilizer
325,701
369,120
285,614306,514(ton/year)
2.
Urea
Price
(Wholesale Price)
4,800
4,800
4,800
4,800
(Tk/ton)
3. Sales Income
1,573,800
1,783,097
1,374,436
1,472,928(1,000Tk/year)
4. Operation costs
2,354,322
2,364,004 2,404,208
2,283,760(1,000Tk/year)
5. Operating Profit(1,029,772(780,522)(580,907)(810,832)(1,000Tk/year))

2007/08
67,301
4,800(10,000)*Note 1

327,960
1,797,023(1,469,063)

Source: Ex-post Evaluation Report (at time of Ex-post Evaluation: Upper), Answers on Questionnaire (attime of Ex-post Monitoring: Lower)
Note 1) The urea price has been revised to 10,000 Tk/ton since June 2008.

(2) Financial Status of Ghorasal Urea Fertilizer Factory
Since the time of ex-post evaluation more deficits have been posted, the cumulative
deficit has risen and the financial status of the factory has worsened further. The major
reason for deficit, as stated above, is that production costs and operation costs have been
21
Production cost/ton = annual operation cost/annual fertilizer production; operation cost/ton = annual
operation cost/annual fertilizer sales volume

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higher than the retail price (Tk 4,800/ton), resulting in permanent deficits.
However, in June 2008 the retail price of urea fertilizer was revised by government
policy, from Tk 4,800/ton to Tk 10,000/ton. As a result, it is expected that the financial
situation will improve from FY2009/2010 onwards.22 Nonetheless, as previously stated,
the Ghorasal Urea Fertilizer Factory frequently experiences shutdowns due to the
obsolescence of equipment and machinery. Some aspects of the factory’s financial statuswill depend on future production capacity.
Table 8: Profit and Loss Statement of Ghorasal Urea Fertilizer Factory (unit: million taka)Item2001/02
2005/06
2006/07
2007/08
1,529
1,374
1,473
328
1. Sales
1,731
2,293
2,135
1,676
2. Cost of Sales
(202)
(918)
(662)
(1,348)3. Gross Profit
4.
Selling
and
119
112
148
121
Administrative Expenses(321)(1,030)(811)(1,469)
5. Operating Profit
6. Non-operating Income
127
104
102
39
(miscellaneous
income,etc.)
7. Non-operating Expenses
146
231
223
241
(interest expenses, etc.)
8. Ordinary Profit before(340)(1,157)(932)(1,671)
Taxes
6.87
3.68
9. Corporate Taxes, etc.
(340)
(1,164)(936)(1,671)
10. Current Net Profit
11.Balance
Brought(624)(3,071)(4,235)(5,171)
Forward12.Prior Period Adjustment
13.Unappropriated Income(964)(4,235)(5,171)(6,842)
at End of Period
14.
TransferredfromReserves
15.
Balance
Carried(964)(4,235)(5,171)(6,842)
ForwardSource: Ex-post Evaluation (data on 2001/02), Answers on Questionnaire (data from 2005 to2008)

During the production line stoppage between August 2007 and August 2009,
approximately 1,120 million taka was allocated from the government and the executing
agency to make up for the loss (approximately 970 million taka from the government andapproximately 150 million taka from the executing agency).

22

Before the revision of the retail price, the production costs were higher than the retail price, resulting in aloss of 2,000-3,000 taka per 1 ton of production. The revision of the price to Tk 10,000/ton is expected toresult in a profit of Tk 2,000-3,000/ton.

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(3) Influence on Fertilizer Distributors and Farmers due to the Revision of the Retail Priceof Urea Fertilizer
As previously mentioned, in June 2008 the retail price of urea fertilizer was revised to
Tk 10,000/ton. This change resulted in corrections to the two-tier pricing system and theelimination of brokers from the fertilizer trade (see Figure 5). It has given a significant
influence on urea fertilizer sales and distribution systems. Meanwhile, it has had little
effect on the retail price for farmers. It is difficult to get a detailed picture of the situation
for this survey due to time issues and other constraints, but as shown in Figure 5, theretail price for farmers after the revision is not very different compared to the retail pricebefore the revision. It seems that the revision was largely accepted. The government isstrongly committed to monitoring and controlling the sales and distribution systems offertilizer through the National Fertilizer and Seed Monitoring Committee.23

Figure 5: Change of the Selling and Distributing System due to the Revision of the Retail
Price of Urea Fertilizer (Outline)
23
The Ministry of Industries in Bangladesh cooperates with the other government ministries and agencies to
run this committee.

1-152.2.2 Conditions of Operation and MaintenanceThe conditions of operation and maintenance have not changed much since the time of
ex-post evaluation. Despite having budget and staffing constraints, the Ghorasal Urea
Fertilizer Factory has been implementing as much maintenance as it can. As previously
stated, personnel-related problems, such as a lack of employees (the number of employees
quitting their jobs is gradually increasing), are getting worse. It is inferred that this will
have an influence to some extent on maintenance operations.
・ Maintenance Plan: At the time of ex-post evaluation there were no long-term
maintenance plans in place or benchmarks for performance. Since then, manuals for
shutdowns and overhaul have been developed, as has a maintenance plan. The factory
now has a plan for preventive maintenance and a maintenance plan for use when an
overhaul is being carried out. Furthermore, inspections of equipment and machinery arebeing carried out based on standardized manuals and maintenance plans. However, as
noted, the outflow of human resources is a cause for concern.
・Preventive Maintenance: Although the need for preventive maintenance was recognizedat the time of ex-post evaluation, a structure to support such maintenance was notestablished. By the time of ex-post monitoring, a plan for preventive maintenance wasdeveloped, but the plan is found to be inadequate due to the shortage in highly
experienced employees and new maintenance supplies. This is also mentioned in the“Spare Parts” section below, but the procurement of parts and machinery in particulartakes time. Even though preventive maintenance is perceived to be necessary, progresshas not been made on this issue due to the shortage of parts and delays in procuring them.
・Quality Control: At the time of ex-post evaluation the importance of quality control was
not fully recognized. Employees prioritized annual production targets and had little
awareness of cost-management. Furthermore, there were no benchmarks for quality
control. On the other hand, at the time of ex-post monitoring, it was found that a strong
commitment to quality control existed. Maintenance operations are being carried out
under a 3-shift (24-hour) structure, and quality control inspections are being carried out
during each shift. Operation manuals are in the process of being developed as well.
Employees are aware of the importance of quality control. However, as the facilities are
becoming more obsolete, the level of quality control is not always satisfactory.
・Spare Parts: At the time of ex-post evaluation, the executing agency’s procedure for the
procurement of spare parts was judged to be inefficient and often prevented the timely
procurement of necessary spare parts. At the time of ex-post monitoring, just as at thetime of ex-post evaluation, necessary spare parts are being procured through proceduresthat in many cases still requires much time until completion of delivery. This preventes

1-16

the timely procurement of the necessary parts.
・Information Management: At the time of ex-post evaluation, documents and othermaterials were not managed systematically, and there was no clear maintenance history
for machinery and equipment. At the time of ex-post monitoring, there is awareness that
information management is still inadequate, but the factory is making efforts to improveinformation management, including the purchase of a batch of computer supplies in 2005
and 2006, and the establishment of LAN systems in some departments.

Figure 6: Gas Compressor after the Repair Figure 7: Inside View of Ghorasal Urea
Fertilizer Factory
3. Conclusion, Lessons Learned and Recommendations
3.1 Conclusion
Since the time of ex-post evaluation, the Government of Bangladesh has revised theretail price of urea fertilizer with the aim of improving the financial structure of domestic
fertilizer factories, including the Ghorasal Urea Fertilizer Factory. At the same time, theGhorasal Urea Fertilizer Factory has been strongly committed to maintenance andinspection and to quality control, and has made efforts to improve information
management, including the purchase of a batch of computer supplies, which have beenused to establish local area networks. However, the project faces the problem that 40
years have already passed since the fertilizer factory commenced operations. The
facilities at the factory are becoming obsolete, resulting in an increasing number of
shutdowns. This has made it difficult to achieve actual urea fertilizer production
according to plan. The revision of the retail price of fertilizer means that financial
improvement may be expected going forward if production capacity can be ensured. It isvital that the recommendations in the below paragraph should be implemented in order toensure the necessary production capacity.
3.2 Lessons Learned
None

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3.3

Recommendations[To the Executing Agency and Ghorasal Urea Fertilizer Factory]■The equipment and machinery in the Ghorasal Urea Fertilizer Factory is becoming more
and more obsolete, and the number of shutdowns is increasing. It makes it difficult toachieve actual urea fertilizer production according to plan. The Executing Agency and thefertilizer factory should put into place an operation and maintenance structure that will
ensure normal operation by reducing the problems of the facilities overall. The factoryshould continue its strong commitment to the maintenance and inspection of equipment
and machinery and continue to replace and renovate facilities.
■The factory should implement efforts to secure human resources and retain its current
employees as soon as possible.
■A system should be constructed to support the procurement of necessary spare parts
without delay. Furthermore, steps should be taken to bolster the implementation systemfor preventive maintenance and the maintenance plan.

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Comparison of Original and Actual Scope
Item1) Output

Plan(1) Upgrading
Ammonia Plant

Actualofthe=>Almost as planned(Changes)- Repair and cleaning of the spareboiler in the reforming section
were cancelled.
- Replacement of the air intake
tower in the air compressionsection was cancelled.
Installationofprocess
compression equipment in thecompoundsectionwascancelled.

(2) Upgrading of the Urea =>Almost as planned
Plant(Changes)- Replacement of the woodenchamber in the urea granulation
section was cancelled.
(3) Installation of a 16MW =>Almost as planned
Gas
TurbinePower(Changes)
Generator- The power generation capacity
was increased to 18MW
(4) Upgrading of Ancillary =>Almost as planned
Facilities(Changes)- Installation of a conveyer belt in
the fertilizer storage area wascancelled.
2) Project Period
3) Project Cost
Foreign Currency
Local Currency
Total
ODA Loan Portion
Exchange Rate

July 1999 to May 2001
(23 months)

July 1999 to September 2001
(27 months)

5,443 million yen
1,018 million yen(393 million Tk)
6,461 million yen
5,443 million yen
1 taka = 2.59 yen(December 1998)

5,443 million yen
1,000 million yen(497 million Tk)
6,443 million yen
5,443 million yen
1 taka = 2.01 yen(2000)

1-19