Last Thursday, the additional secretary in the Union petroleum & natural gas ministry, Naresh Narad, OIL chairman and managing director BB Sharma, senior officials of Reliance Industries and the resident commissioner in New Delhi, VK Pipersenia (representing the Assam government) finally managed to rescue the deadlocked project after lengthy discussions, sources in the Assam government said. "Reliance Industries wanted an assurance that OIL pay demurrage if its supply of petroleum gas is of poor quality. Initially this precondition put off OIL, but in the end a solution was worked out," sources told The Financial Express.

The Rs 3,600 crore petrochemicals plant is being promoted by Reliance Assam Petrochemical Ltd (RAPL), a joint venture between Assam Industrial Development Corporation and Reliance Industries. The two hold stakes of 11 per cent and 40 per cent, respectively, and the rest will be with the public. Way back in the eighties, the petrochemicals project came to Assam as a gift from the late Rajiv Gandhi, then Prime Minister, when Asom Gana Parishad signed the famous Assam accord with the Union government.

In November 1995, PV Narasimha Rao laid the foundation stone of the project despite serious differences between OIL and RAPL over the agreement to be signed. "Being minority shareholders we had nothing much to say but Reliance insisted on the demurrage clause and they had their reasons too," the government source said. OIL has agreed to pay damages at the rate of Rs 2,500 per thousand cubic metre if the supplied gas falls short of the required quality or quantity. Both the parties have also agreed to pay damages in cash if the project is terminated.

"If the project is terminated within 15 years from the date of commissioning, the party terminating the contract will have to pay the other party liquidity damages equal to the cost of one year of interest on the total outstanding debt as on the date of the termination of the contract," sources said. At the March 3 meeting, RAPL and OIL decided to sign a formal memorandum of understanding this Thursday.