NEW DELHI, Aug 25: Intense political and business lobbying has prompted Union minister for chemicals and fertilisers M Arunachalam to take the unprecedented step of overruling the selection of Italian comglomerate Snamprogetti for the $ 800 million turnkey contract for the Indo-Oman fertiliser project.

The $1.2 billion dollar complex is being set up on a 50:50 partnership between Oman Oil Company and two government owned Indian companies, Kribhco and RCF. Snamprogetti and the German consortium of Krupp-Udhe were shortlisted and the former was selected after a detailed evaluation of bids by Lazard Brothers."

It may be desirable to ask the joint management committee (of the Indo-Oman project) to re-evaluate all the offers on a fresh basis," the minister noted on the file on August 14.

oing a step further, Arunachalam has unilaterally decided that German consultants Morgan Grenfell should be given the responsibility of re-evaluating the bids.

Pertinently, Morgan Grenfell is a subsidiary of Deutche Bank.Pertinently, the minister has cited in his order letters written by leader of opposition Atal Behari Vajpayee and his colleague Murli Manohar Joshi expressing apprehension about the process of evaluation of bidders.

"Doubts have been raised specifically on grounds of capability and completion of the project in a time bound manner," Vajpayee wrote in a letter to the chemicals and fertiliser minister.Arunahalam further mentioned the name of A R Antulay, chairman of the standing committee of petroleum and chemicals, who had also complained that international tender norms were violated while awarding the contract to Snam.

The minister's order follows intense lobbying by the German consortium whose officers met the minister to formally protest the award of contract to the Italian giant.

The minister, in fact, has taken into account the points raised by Krupp-Udhe - that Snam had no experience of erecting mega fertiliser projects, that there were errors in the loading criteria used by Lazard for evaluation of bids and that the German consortium would have awarded a $ 100 million contract to Larsen & Tubro had they bagged the project - in his order.Arunachalam's unusual step to overrule laid down procedures for selection of contractor for the Indo-Oman fertiliser project has taken the bureaucracy and the management of RCF and Kribhco by surprise.

Well placed sources in the government said that the minister's obervation went against laid down procedure for evaluation of bidders for projects.

"The evaluation should be conducted by the JMC and there is no role for ministerial intervention," according to a top official in the government who is in the know about the project.

The Krupp-Udhe representation, which was made after they lost out in the race, was considered in detail by the JMC - which has equal representation from Oman and India - and found unacceptable. The department of fertiliser had also, in a detailed note to the minister, stood by the decision taken by Lazard Brothers to shortlist Snam.

Arunachalam, however, remained unconvinced and after mulling over the file for almost two months (the comments of the department was sent to him on 25th June) decided to overrule the official advice to stick by Snam.

Official sources said that asking for a re-evaluation might be within the powers of the minister but ordering that Morgan Grenfell should look into the bids afresh has stirred up a hornet's nest in the4bureaucracy and the JMC.

There are laid down procedures for selection of consultants to make a set of complex calculation to arrive at the net present value of competitive leverged bid of the size of this project.

Lazard brothers was selected after an international tender was floated in which several international consultants, including Morgan Grenfell, paticipated.

"To unilaterally award the task of re-evaulation to the German company, especially when a German consortium in hotly in the race, is expected to ruffle feathers all around," an official said.

Ministry sources also said that the decision to call for a re-evaluation might upset the Omanese, who had in a earlier written communication to the department of fertilisers had said that they were not in favour of awarding the contract.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.