In a fax message to the department of fertilisers last week, Uhde has claimed that it will keep the debt-equity ratio at the original level of three-to-one.

What is more, the debt portion of the $800 million turnkey plant and equipment contract will be guaranteed by the KFW - the official German soft aid agency - to ensure easy financial closure.

Lastly, Uhde reiterated its earlier offer to reduce the bid price by a minimum of 2.5 per cent. This reduction can go up to 10 per cent, the German company had hinted to fertiliser department officials.

The fresh Germaninitiative makes the conditionalities imposed by lenders on the Snamprogetti offer look unattractive.

The lenders have insisted that the debt-equity ratio be stepped up from 3:1 to 2:1 because they are not comfortable with the economic viability of the entire proposition, especially the clause relating to buy-back of urea by India at a base price of $110 per tonne.

The lenders have also imposed a few other caveats - that sufficient amount of stand-by equity be brought in by promoters to ensure smooth project completion in case of cost and time overruns and there is no dividend outgo, until the $110 base price is fully paid to the Indo-Oman Fertiliser Company.

The department of fertilisers has refused to comment on the new initiative by Uhde but sources said that it will be difficult to ignore the terms which are now on offer from the Germans.

For one, by sticking to the earlier debt-equity ratio of 3:1, the Rashtriya Chemicals and Fertilisers and Kribhco end up saving Rs 180 crore as extra riskcapital outgo.

More than the money, the Uhde offer helps in keeping time overruns under check, as the extra Indian investment would have had to be vetted through a lengthy process -- it would have needed approvals by the boards of the respective companies before being okayed by the Public Investment Board and the Cabinet Committee on Economic Affairs.

This is a procedure that takes a minimum of six months and, given the controversial nature of the project, up to one year.

The guarantee on the debt portion by KFW also means that the project can be out of the grip of existing lenders -- BNP, JP Morgan and ABC -- who are insisting on fresh conditionalities which have since gone to upset the economics of the project.

If the debt-equity conditionality and the debt cover from KFW are taken together, along with the promise to reduce the project cost by 2.5 per cent, the German offer will become difficult to ignore for too long, department of fertiliser officials claim.

Till date, the new financialinitiatives by Uhde have being rejected by the government because they have come only after Snamprogetti was selected as the preferred bidder and well after the formal bidding process was completed.