It is learnt that Iffco, the new partner which came forward to rescue the crisis-ridden project following withdrawal of French export credit agency Coface from the lending consortium and fresh terms dictated by the remaining bankers, had put a condition of scaling down the project cost by at least $100 million.

The mega project, to be set up in Oman by Indian sponsors Iffco, Kribhco and RCF and Omani partner Oman Oil Company (OOC), is likely to be commissioned in 2001 and would have a capacity of producing 14.5 lakh tonnes of urea and 3.3 lakh tonnes ofammonia every year.

Indian and Omani partners identified several items for cost reduction including deletion of one gas turbine unit and ammonia compressors, reduction in the cost of sea water pumping and treatment unit, change in building construction and reduction in the engineering and erection costs. The sponsors of OIFP also agreed for a debt service reserve account (DSRA) equal to the sum of six months debt service requirements plus $15 million, sources said.

It was agreed that 100 per cent of the DSRA would be funded through letters of credit to be opened in banks by the sponsors in proportion of their equity. They also decided to make efforts for reducing the level of DSRA commensurate with the reduction in capital cost, sources added.

The sponsors would tie up with an international urea trader for sale of the product not required to be imported by India. It was decided that 100 per cent saleable ammonia in excess of 3,33,000 tonnes committed to the ammonia off-taker would be taken by Iffco atthe same terms and conditions as would be applicable to the selected off-taker. All the pre-incorporation expenses would be treated as deferred revenue expenditures and would be reimbursed by OIFP to RCF, Kribhco and OCC out of funds available for distribution to the shareholders but prior to any dividend payment.