New Delhi, Dec 11 (IANS): Faced with increasing demand and rising cost of importing raw material, the Indian fertiliser industry is eying mineral assets in Africa.

"Today there is a possibility of buying stakes in several mines, which are in initial stages of operations," A. Vellayan, chairman of the Fertiliser Association of India (FAI), told IANS.

Some of the key mining areas the industry is eyeing in Africa are in Eritrea, Ethiopia, Congo and Ghana.

Vellayan said the prices of fertilisers and the subsidies given by the government would also be reduced if fertiliser companies entered into joint ventures (JVs) with mining companies.

"This will have significant impact on prices. Currently, there are Indian companies in South Africa, Tunisia and Morocco, and many of them are thinking of entering other African countries. But the government's support is required," Vellayan, group chairman of the Chennai-based Murugappa group, said.

Fertiliser manufacturers have asked the government to create a $20 billion sovereign fund to buy overseas mineral assets.

"Although there was talk of allocating $1 billion for a sovereign wealth fund for public sector companies, we have discussed with the government for a sovereign fund of about $20 billion for potash and phosphates," he said.

"Either we can go and buy, or else the government pays the same amount ($20 billion) in subsidies," he said.

India, which consumed 58 million tonnes of fertilisers in 2010-11, lacks key mineral ingredients for the manufacture of fertilisers such as potash and phosphatic rock and has to depend on imports.

The country imports 100 percent of potash and 90 percent of di-ammonium phosphate (DAP). In 2010-11, the country imported 7.41 million tonnes of DAP and 4.5 million tonnes of potash.

The rising input cost has led to a rise in prices of DAP -- which doubled from Rs.9,350 a tonne in April 2010 to Rs.18,500 a tonne at present.

The federal government has given Rs.90,000 crore fertiliser subsidy to the farmers to protect them from fluctuating international prices, including budgetary provision of Rs.33,500 crore for phosphatic and potash-based fertilisers for 2011-12.

Industry watchers say ownership of mineral reserves can bring long-term relief and security to the sector which is reeling under high import costs due to the depreciation of the rupee.

Also recently, major foreign producers such as the Russian firm Uralkali, which is part of a larger international cartel, denied discounts on potash to Indian companies.

"In the long term, we need assured supplies, as we cannot depend any longer on one or two suppliers. We are a big country and a huge population to feed," said Satish Chander, director general of FAI.

"It will be more economical than buying the minerals from a few suppliers," Chander added.

Big names in the international mining industry like BHP-Billton, Rio Tinto and Vale are eying African assets to mine potash, which is currently controlled by five producers in the world, accounting 60 percent of the total output.