May 21 (Bloomberg) -- Rashtriya Chemicals & Fertilizers Ltd., India’s biggest state-run urea maker, plans to invest $1 billion to set up a facility in Ghana, a government official with direct knowledge of the matter said.

The plant will have the capacity to produce 1 million metric tons of the soil nutrient, the official said in New Delhi, declining to be identified as the information isn’t public. Rashtriya Chemicals plans to secure fuel for the project from Ghana Oil Co., the official said.

The fertilizer ministry has approved the investment proposal, the official said. U.S. Jha, chairman and managing director, declined to comment on the company’s investment plans. Cyril Oppong, spokesman for Ghana Oil, was unable to comment immediately.

India needs about 26 million tons of urea annually compared with domestic production capacity of 21 million tons. The shortfall in supply is met through imports.

A shortage of natural gas, the main feedstock for making urea, is forcing companies such as Indian Farmers Fertilizer Cooperative Ltd., India’s largest fertilizer maker, to form joint ventures abroad to set up urea plants. As many as six Indian fertilizer companies have asked the government for more gas to increase their production capacities. A panel of ministers headed by Finance Minister Pranab Mukherjee sets prices and allocates gas.

Demand for gas in the next three years may climb to about 360 million cubic meters a day from 260 million cubic meters a day currently, B.C. Tripathi, chairman and managing director of GAIL India Ltd., said March 12. Supply may increase to about 230 million cubic meters a day from about 170 million cubic meters now, he said. GAIL is the country’s monopoly natural gas distributor. Power stations and fertilizer plants in India are shifting to the cleaner-burning fuel after Reliance Industries Ltd. started production from the nation’s biggest gas field in April. Demand may rise after new pipelines are built to connect more factories, Tripathi said.