India - Thal Fertilizer Project

Drocment of The World Bank FOR OFFICLAL USE ONLY Report No. 13059 PROJECT COMPLETION NOTE INDIA THAL FERTILIZER PROJECT (LOAN 1743-IN) MAY 17, 1994 Country Operations, Industry & Finance Division Country Department II South Asia Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.   FOR OFFICIAL USE ONLY THE WORLD BANK Washington, D.C. 20433 U.S.A. Office of Director-General Opertions Evaluation MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Note on India - Thal Fertilizer Proiect - ( Loan 1743-IN) Attached is the Project Completion Note on India - Thal Fertilizer Project (Loan 1743-IN) prepared by the South Asia Regional Office. The project was the tenth Indian fertilizer project to receive assistance from the Bank. It was designed to increase the nitrogenous fertilizer producing capacity of India by nearly 1.5 million tons of Urea per year and play an important role in supplying fertilizers, especially to the State of Maharashtra. The plants were designed to use the newly available natural gas from Bombay High Offshore fields, as raw materials. The project was signed in August 1979 and a condition of loan effectiveness was the appointment of the ammonia plant engineering consultants. The effective date of the project was postponed several imes pending the final decision by the Indian Cabinet. The Cabinet's decision was made in August 1980 which reversed the recommendations made by the implementing agency. Thereafter, the Bank requested to review the evaluation procedure and criteria and found them unacceptable because of shortcomings in the technical qualification of the selected firm. Since the condition of the loan regarding the appointment of consultants could not be met, the Bank informed the Government of India that the loan would not be made effective. Accordingly, the project is not rated and no audit is planned. Robert Picciotto by H.E. K6pp Attachment |his document has a resricted distribution nd may be used by recipients only in the performAnce of their official duties. Its contents may not otherwiwe be disclosed without World Bank authorization.   PROJECT COMPLETION NOTE INDIA THAL FERTILIZER PROJECT (LOAN 1743-IN) 1. On June 26, 1979, the Board approved a US$250 million for the Thal Fertilizer Project in Maharashtra State. The expected closing date was November 30, 1984. The project was signed on August 20, 1979. This was the tenth Indian fertilizer project to receive assistance from IBRD. The basic objectives of the project was to assist the Rashtriya Chemicals and Fertilizers Ltd. in the construction of a fertilizer plant. 2. Under the project, of a total investment of some $812 million, a fertilizer manufacturing plant was to be constructed at Thal, in western Maharashtra State. The plant would have consisted of two natural gas-based ammonia units and three urea units, as well as auxiliary facilities such as steam boilers and power generators, maintenance shops, and facilities for product handling and storage. The ammonia units would have been the largest steam reformation plants to be built in India. The project also included provision of infrastructure such as road improvement, water supply, and a power line. Rail sidings were to be constructed for the efficient movement of raw and finished materials to and from the plant. Environmental aspects had been carefully reviewed to ensure that the plant would not adversely affect the region, and adequate provisions have been made to ensure the control of effluents. The plant, which was to be commissioned in 1983, was expected to produce 2,700 tons of ammonia and 4,500 tons of urea per day at full capacity. 3. A condition of loan effectiveness was the appointment of the ammonia plant engineering consultants, for which proposals had been sought in November 1979. Initial contract negotiations were held with a British firm by the implementing agencies and agreed to by the Government of India, Committee of Secretaries. This contract was then sent to the Cabinet for final approval. In the time that it took for the Cabinet to make a decision and Bank to review the evaluation the project effectiveness date was extended eight times up to December 31, 1980. Finally, the Cabinet decision was made in August 1980, which reversed the decision taken previously by the implementing agency, and a Danish firm was selected. 4. The Bank reguested to review the evaluation procedures and criteria utilized by the Cabinet in making their decision. This was reviewed by the Bank on October 24, 1980. The Bank finally decided not to accept the Government's decision on the firm. The final decision was based on the fact that the said Danish firm did not have the experience for the construction of a complete ammonia plant with a capacity of 1,350 tons per day - the firm's chosen technology and capabilities as engineering contractors. This was considered essential to ensure the satisfactory and timely implementation of the Project. There were other firms who had submitted proposals who had the required expertise. 5. The Bank was also apprehensive on the methods and procedures followed by the Government in arriving at its final decision, which were considered contrary to the representations, made during loan negotiations and on which the Loan was presented to the Board. The Bank had reguested the Government to submit a full assessment of the first ranked firm along the previously agreed upon criteria, but it was never received. 6. As the condition regarding appointment of consultants remained unfulfilled, the Bank informed the Government that the Loan Agreement could not be made effective, hence the Loan Agreement was terminated after December 31, 1980.   AfTACHiMEN PROJECT COMPLETION NOTE INDIA THAL FERTILIZER PROJECT (LOAN 1743-IN) BASIC DATA Loan Amount: US$250.0 million Cancellations: US$250.0 million Approval Date: June 26, 1979 Agreement Date: August 20, 1979 Effective Date: No Effectiveness Closing Date: January 1, 1981