Indo-Russian titanium project hits roadblock

The first major Indo-Russian joint venture project, envisaging production of titanium dioxide with an investment of Rs 2,000 crore in Orissa, has hit a major roadblock due to Indian Rare Earth's (IREL) refusal to enter into a long-term contract with the promoters for supply of raw material to the project.

The project figured prominently in the discussion between Prime Minister Manmohan Singh and Russian President Vladimir Putin during the latter's visit to India in January and Singh's return visit to Russia later.

Interestingly, IREL is under the administrative control of the Department of Atomic Energy, which is under the direct charge of the prime minister.

The JV is being promoted by Russia's two state-run agencies, Vnesheconombank or the Bank for Foreign Economic Affairs and JSC Technochim Holding, and Saraf Agencies, a Kolkata based firm.

Apart from the titanium dioxide plant, the scope of the JV included setting up a beach sand mineral SEZ in the area. Saraf Agencies had signed a pact with the Russian firms for the project during Putin's visit to India.

According to the agreement, the Russian firms will together hold 55 per cent stake in the project. Sources said the promoters were to source ilmenite, a key raw material for production of titanium dioxide, from Orissa Sands Complex (OSCOM), a unit of IREL, near Chhatrapur. Accordingly, they had requested IREL to enter into a long-term contract for supply of the raw material.

However, S Sivasubramanian, CMD, IREL in a recent letter to B N Majumdar, director, Saraf Agencies, pointed out that the IREL board has decided not to enter into a long haul contract for supply of raw material as it has not entered into such contracts with other customers.

"We should supply you the product on terms we extend to all our other customers," he said, adding, "the supplies will be based on prices ruling at the time of delivery."

Interestingly, IREL recently floated a tender inviting expressions of interest to set up a 10,000 tonnes per annum titanium sponge plant adjacent to OSCOM on a build-own-operate (BOO) basis.

It expressed its willingness to provide, among other things, 100 acres of land or grade ilmenite upto a maximum quantity of 50,000 tonnes per year at a price of Rs 1,800 a tonne and sub-lease of north sector II mining area containing minimum of 7 million tonnes of ilmenite reserves and associated minerals such as zircon, rutile, sillimanite, garnet and monazite on successful operation of the titanium sponge plant.

"It is unfortunate that IREL has decided to invite EoIs for setting up a titanium sponge plant and commit assured supply of ilmenite to the project while it ignored the plea for long-term pact for our project which is touted as a major Indo-Russia trade initiative," said a senior official of Saraf Agencies.

It may be noted that the Kolkata-based company, along with its Russian partners, was slated to sign the MoU with the Orissa government for the titanium complex in December.

But raw material supply issue is expected to derail the plan. Meanwhile, the project authorities have sought an appointment with Orissa Chief Minister Naveen Patnaik to discuss the issue.

The Saraf Agencies already has 250 acres, including 48 acres of government land, at Chhatrapur for the first phase of the project. Another 250 acres would be acquired in the second phase, the source said. The project was to come up over an area of about 600 acres.