Orissa's Titanium Project Likely to Progress After Agreement Among Disputing Indo-Russian Partners

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Researched by Industrial Info Resources (Sugar Land, Texas)--The state government of Orissa and the two partners of Indo-Russia titanium joint venture company Titanium Products Private Limited (TPPL) signed a tripartite agreement and resolved an almost two-year-old dispute over the project. The promoters of the project had disagreed about the sharing of initial costs and the title of the acquired land.

In January 2008, two Indian promoters, Sharaf Agencies Private Limited (SAPL) (Kolkata, West Bengal) and Titanium Mineral Products Limited (TMPL) (Kolkata), formed a joint venture company, TPPL, in collaboration with two Russian promoters: the government-owned State Property Management Agency (Moscow, Russia) and JSC Technochim Holding (St. Petersburg, Russia). While SAPL would hold a 45% stake, the State Property Management Agency would hold 51%. Technochim would hold the remaining 4%.

In October 2008, TPPL signed a memorandum of understanding with the Orissa government to set up a $445 million integrated titanium complex and a sector-specific Special Economic Zone (SEZ) at Chatrapur, in the state's Ganjam district. The project ran into troubled waters when SAPL demanded that Technochim pay $22 million toward the initial project implementation costs, and faced further difficulties when the Russian partners wanted the land title to be in TPPL's name instead of SAPL.

Under the terms of the recently signed agreement, the project will be implemented by the Russian party alone, and SAPL will no longer be associated with it. An arbitrator, appointed in the next few days, would give a ruling regarding the investment and land issues that plagued the project. The agreement makes it clear that the arbitrator's decision would be binding on both parties. Over the next month, the Russians will hold talks with both the Indian government and the state government, and follow with an announcement about the project's future. Even if the arbitrator requires a longer time to submit the report, the project is expected to advance.

Orissa's Industry Minister Raghunath Mohanty said that the agreement has saved the titanium project from uncertainty, and he hopes that the Russian promoters will execute the project soon. Meanwhile, Rahul Shroff from SAPL said that his company would set up a separate titanium project in Orissa.

The proposed integrated titanium project had attracted a great deal of attention when it was first announced, as it intended to utilize minerals and beach sand to produce the highly in-demand titanium sponge. The original plan involved a two-phase approach to the project, with the first phase involving an investment of about $267 million and a completion date of October 2010. The project plans envisaged the production of 108,000 tons per year of titanium slabs; 40,000 tons per year of titanium dioxide pigments; 10,000 tons per year of titanium sponge; and 68,000 tons of pig iron as a byproduct. Titanium is light and corrosion-resistant, and the products would be largely used in aircraft engines, automobiles, chemical plants, and power plants.

The project promoters signed a long-term supply agreement with the state-owned Indian Rare Earths Limited (IREL) (Mumbai), whereby the latter would supply TPPL with 200,000 tons per year of raw materials, primarily in the form of ilmenite. TPPL also has a long-term buy-back contract with the Russian promoters, under which the company can purchase at least 45,000 tons per year of titanium slag and 30,000 tons per year of titanium dioxide pigment.

About 200 acres of land was acquired and handed over to SAPL by the district administration through the Orissa Industrial Infrastructure Development Corporation (IDCO) (Bhubaneswar, Orissa) and initial work to prepare the land for the plant was started. TPPL intended to acquire another 350 acres of land to develop the SEZ in the second phase. Disputes began when the Russian promoters wanted the land title to be registered in the name of TTPL and not SAPL who intended to sub-lease the land to TTPL. The Russian promoters even threatened to pull out of the project at that stage. SAPL, on the other hand, accused the Russian party of not complying with the terms of the agreement and the decision taken by the joint venture's board of directors. The agreement has come about after several rounds of discussions.

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