Search the Internet          Tips  Sites: Finance, Investment

India, Oman urea project faces more delay

A planned Indian-Omani urea plant has faced a new delay and the decision to build the $969 million project will be decided by the Indian cabinet next week, diplomats and project officials said.

"The future of the project is in the hands of the Indian cabinet," said Sanjiv Kohli, first secretary, Indian embassy in Muscat. However, Kohli refused to elaborate further.

Urea is an important component in the manufacture of fertilisers.

In June, an official from Oman India Fertiliser Company said that the construction of the plant was due to start early this year.

"It is not clear now whether the project will go ahead or not. However, we were told that the Indian cabinet would meet on January 24 to decide on its future," a project official said.

Earlier this month, Omani Economy Minister Ahmed Abdulnabi Mekki said that the Gulf Arab state had made every effort to make the project viable.

"There is still a delay in this project, not because we aren't sure but our Indian partners have been putting it off for quite some time now, despite our efforts to reduce the price from $130 to $100 per tonne of urea which they have agreed to buy from us. We still think the project is viable and economically feasible. Now, it's up to India to make it happen," he said.

Officials said last year that Oman has guaranteed to sell the urea to India at a fixed, predetermined long-term price to compensate for the fluctuations of international prices.

The two governments agreed in late 1999 to restructure the project after urea prices dropped internationally.

On June 20, India approved a change in partners and cleared equity investments of $80 million each by Krishak Bharati Cooperative Ltd (KRIBCHO) and Indian Farmers Fertilisers Cooperative Ltd (IFFCO) in the Oman India Fertiliser Company.

Oman Oil Company was expected to contribute $160 million in equity in the project to be built near Sur on the Omani coast.

The project was planned to have a debt component of $649 million. The plant was expected to produce 1.65 million tonnes of granulated urea and 248,000 tonnes of surplus merchant grade ammonia per year.

India had committed to purchase up to 1.65 million tonnes of urea annually from the joint project. Oman Oil Company would make gas available to the project at the rate of $0.77 per million British Thermal Unit for a period of 10 years against the prevailing domestic price of around $2.

Tell us what you think of this report