Mumbai, Feb 20: A strategic delay in the opening of a letter of credit (LC) for the import of special quality steel plates for Reliance Industries liquified natural gas terminal project has yielded a foreign-exchange bonanza, thanks to rival undercutting bids from two steel giants Pohang Steel of Korea and Germany's Preussag Stahl.The project, being implemented by Bechtel Engineering, and sub-contracted to GR Engineering and Vijay Tanks & Vessels, required special boiler-quality plates, which have special high-tensile strength. The executors have reaped substantial gains from recent forex fluctuations in the international currency markets.
The exact quantum of gain from the delay in opening the LC has not been revealed. It is, however, believed that the cut in boiler-quality steel plates for the project was in the region of 10 per cent owing to renegotiation of the unopened LC.
The plates were being imported from steel-making major Preussag Stahl, one of the five largest steel-makers in Germany andleading players in boiler- quality plates supply in India. Around the time the contract was handed out to Preussag, in mid-1997, the south-east Asian crisis was just breaking.The Reliance project contractors thereafter held up opening of the LC, citing various internal reasons.
In the meantime, international price for the required boiler-quality plates slumped, encouraging Pohang Steel of Korea, beseiged by the Korean economic crisis, to make an offer at virtually floor rates for the plate supply.This led the project executors to get in touch with Preussag, seeking to renegotiate the still-unopened letter of credit. After talks on the subject between the two parties, Preussag was forced to revise its quote for the boiler-quality plates downwards, beating Posco finally to the deal.Perussag Stahl is one of the largest German steel-makers and has been one of the leading exporters to India of high-quality steel plates. The company markets steel plates for practically every heavy-engineering project, throughnegotiations or through competitive bids for public-sector companies' global tenders.
The plates were contracted for Reliance's largest project yet - at Jamnagar, where the petrochemicals and petroleum behemoth will deploy an estimated Rs 20,000 crore over the next 36 months, in an area of 7,000 acres. Reliance Industries' 15 million-tonne refinery will be the world's largest single- stream grassroot refinery. Its capital cost is one of the lowest compared to other new domestic and international refineries.
The petrochemicals major will achieve highest value addition per unit of capital investment, claims Reliance's annual report for 1996-97.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
