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Our Economic Bureau
New Delhi, Nov 8: The state-owned Rashtriya Chemicals and Fertilisers Ltd (RCF) has expressed the fear that in absence of the Thal expansion it would be difficult for the company to organise requisite resources for the Oman joint venture project.
The company has favoured simultaneously action on the Thal expansion and the proposed Oman joint venture project for supporting the outlay for the latter as "during the initial years of operation of the Oman project, the cash availability with RCF will be limited".
According to a note prepared by the ministry of chemicals and fertilisers, it was pointed out that Thal ammonia expansion would greatly enhance the cash availability of RCF to support Oman project to a large extent.
It was also argued that in absence of the Thal ammonia/urea project, "the tax burdens on RCF will not only reduce the cash availability, but will also adversely affect the cash position in subsequent years." Hence, "it is imperative that both the projects, which are complementary to eachother, should be pursued together".
The Thal expansion, it was pointed out would result in a saving of Rs 360 crore vis-a-vis a green field fertiliser project. Also urea produced through expansion will add to the long-term viability of Thal unit and the retention price of urea shall continue to be lower than any of the units set up recently.
As far as the Oman joint venture is concerned, the ministry note points out that it will assure 15 lakh tonnes of urea to India at lowest international price prevailing in the Middle East. In the absence of domestic availability of gas, considering the competitively priced gas at Oman and the proximity of India to Oman, it says, "this joint venture project is the lowest cost option among the joint ventures."
The joint venture project for producing methylamine at Thal would enhance market presence of RCF in the field of industrial chemicals. RCF already has a major market share in India and in the growing market this diversification would have a long-termadvantage.
Referring to resources the note says that funds have more or less been committed. Also, these projects are likely to be aimed at increasing the cash resources of the company. The Thal expansion project of RCF will be funded through a mixture of debt and equity and financial institutions have already given their in-principle approval to support the scheme.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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