Mystery around Gujarat PSU 'transfer' of Rs 250 crore to Canadian firm Karnalyte

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:

---

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

Comments

DILIPGANDHI-JAMNAGAR said…

Sir,
Not only Karnalite, GSFC could not implement any project within time & cost estimate after year 2003-04. Why ? Board of GSFC must look into it for survival & progress of Co.

January 04, 2020

Anonymous said…

Excellent article Sir. It is just as puzzling for the shareholders of Karnalyte Resources Inc as the company has continued a downward spiral since GSFC's involvement in 2013 when the $45 million dollar investment was made.

That equity investment brought in to Karnalyte was intended for the advancement of Karnalyte's sole asset, the Wynyard potash project, but the vast majority of that money has been spent on everything but advancing the project to the next stage.

Approximately $100 million (CAD) had been spent on advancing the project to the construction ready stage prior to GSFCs involvement in 2013.

It is reported the shares purchased in the financing are held as collateral by one of the banks in India, which as you correctly point out, the value of those shares have been decimated.

According to corporate reports from Karnalyte, the company is now changing its primary focus to building a nitrogen facility in Saskatchewan, despite failed attempts by others in the industry due to viability issues.

In December, GSFC purchased an additional 11 million shares of Karnalyte through a .17 cents rights offering, which included a peculiar clause to allow GSFC to purchase other shareholders rights against their will.

Now with allegations of breaches of Canadian securities law, alleged involvement in vote irregularities, suing individual shareholders, and the suspicious rights offering that awarded both Board and voting control of Karnalyte to GSFC, I agree 100% with you that an investigation should be requested by both countries officials.
into exactly what has gone on.

January 11, 2020

Gujarat Information Commission issues warning against misinterpretation of RTI orders

By A Representative The Gujarat Information Commission (GIC) has issued a press note clarifying that its orders limiting the number of Right to Information (RTI) applications for certain individuals apply only to those specific applicants. The GIC has warned that it will take disciplinary action against any public officials who misinterpret these orders to deny information to other citizens. The press note, signed by GIC Secretary Jaideep Dwivedi, states that the Right to Information Act, 2005, is a powerful tool for promoting transparency and accountability in public administration. However, the commission has observed that some applicants are misusing the act by filing an excessive number of applications, which disproportionately consumes the time and resources of Public Information Officers (PIOs), First Appellate Authorities (FAAs), and the commission itself. This misuse can cause delays for genuine applicants seeking justice. In response to this issue, and in acc...

Targeted eviction of Bengali-speaking Muslims across Assam districts alleged

By A Representative A delegation led by prominent academic and civil rights leader Sandeep Pandey visited three districts in Assam—Goalpara, Dhubri, and Lakhimpur—between 2 and 4 September 2025 to meet families affected by recent demolitions and evictions. The delegation reported widespread displacement of Bengali-speaking Muslim communities, many of whom possess valid citizenship documents including Aadhaar, voter ID, ration cards, PAN cards, and NRC certification.

'Govts must walk the talk on gender equality, right to health, human rights to deliver SDGs by 2030'

By A Representative With just 64 months left to deliver on the Sustainable Development Goals (SDGs), global health and rights advocates have called upon governments to honour their commitments on gender equality and the human right to health. Speaking ahead of the 80th United Nations General Assembly (UNGA), experts warned that rising anti-rights and anti-gender pushes are threatening hard-won progress on SDG-3 (health and wellbeing) and SDG-5 (gender equality).

A comrade in culture and controversy: Yao Wenyuan’s revolutionary legacy

By Harsh Thakor* This year marks two important anniversaries in Chinese revolutionary history—the 20th death anniversary of Yao Wenyuan, and the 50th anniversary of his seminal essay "On the Social Basis of the Lin Biao Anti-Party Clique". These milestones invite reflection on the man whose pen ignited the first sparks of the Great Proletarian Cultural Revolution and whose sharp ideological interventions left an indelible imprint on the political and cultural landscape of socialist China.

Is U.S. fast losing its financial and technological edge under Trump’s second tenure?

By Dr. Manoj Kumar Mishra* The United States, along with its Western European allies, once promoted globalization as a democratic force that would deliver shared prosperity and balanced growth. That promise has unraveled. Globalization, instead of building an even world, has produced one defined by inequality, asymmetry of power, and new vulnerabilities. For decades, Washington successfully turned this system to its advantage. Today, however, under Trump’s second administration, America is attempting to exploit the weaknesses of others without acknowledging how exposed it has become itself.

Gandhiji quoted as saying his anti-untouchability view has little space for inter-dining with "lower" castes

By A Representative A senior activist close to Narmada Bachao Andolan (NBA) leader Medha Patkar has defended top Booker prize winning novelist Arundhati Roy’s controversial utterance on Gandhiji that “his doctrine of nonviolence was based on an acceptance of the most brutal social hierarchy the world has ever known, the caste system.” Surprised at the police seeking video footage and transcript of Roy’s Mahatma Ayyankali memorial lecture at the Kerala University on July 17, Nandini K Oza in a recent blog quotes from available sources to “prove” that Gandhiji indeed believed in “removal of untouchability within the caste system.”

'MGNREGA crisis deepening': NSM demands fair wages and end to digital exclusions

By A Representative The NREGA Sangharsh Morcha (NSM), a coalition of independent unions of MGNREGA workers, has warned that the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) is facing a “severe crisis” due to persistent neglect and restrictive measures imposed by the Union Government.

On Teachers’ Day, remembering Mother Teresa as the teacher of compassion

By Fr. Cedric Prakash SJ It is Teachers’ Day once again! Significantly, the day also marks the Feast of St. Teresa of Calcutta (still lovingly called Mother Teresa). In 2012, the United Nations, as a fitting tribute to her, declared this day the International Day of Charity. A day pregnant with meaning—one that we must celebrate as meaningfully as possible.

Gujarat minority rights group seeks suspension of Botad police officials for brutal assault on minor

By A Representative A human rights group, the Minority Coordination Committee (MCC) Gujarat, has written to the Director General of Police (DGP), Gandhinagar, demanding the immediate suspension and criminal action against police personnel of Botad police station for allegedly brutally assaulting a minor boy from the Muslim community.

Counterview

Search This Blog