A top government source revealed that unless the Federation of Indian Export Organisation (FIEO) sticks to its commitment to invest 11 per cent equity in the project the signing of the initial agreement between Tamil Nadu Corporation for Industrial Infrastructure Ltd (Tacid), the nodal agency for overseeing the project, and Bukitt Katil of Malaysia which has won the contract for implementing the project, may be delayed.

Apparently FIEO is still trying hard to raise the equity portion from other industry bodies like CII and interested exporters since it is short of resources. Tacid will shortly be having a discussion with FIEO on this and hopes to conclude the initial agreement with Bukitt Katil soon.

Meanwhile, the Malaysian firm which has agreed totake 89 per cent equity stake in the project having a total equity component of $40 million (Rs 168 crore) has been asked by the state government to increase the lease rental for the initial years. Tacid has proposed the PECC project on a build, own, operate and transfer (BOOT) basis with a lease cover of 40 years out of which it is willing to give a five-year moratorium on lease rentals.

However, sources say Bukitt Katil has not agreed to this as it fears the `bankability' of the project with lenders would be seriously impaired if it agrees to match the rentals of succeeding years after the first 12 years.

The lease rental costs will triple and lenders will perceive this as a high risk venture and the project will therefore be considered unviable, it is said.

The PECC also faces another hitch from the point of view of the Malaysian company which is seeking to implement the project along with consortium partners Ogden IFE of Australia and Mancon of Malaysia. It wants the approach road to the PECC sitein Nandambakkam widened by one kilometer from the Kattipara junction to the site where the project is to be located. Only if this is done the consortium feels the hotel project to go along with the PECC can be taken up.

Meanwhile Bukitt Katil is keen to allow Ogden IFE of Australia to play a major role in the PECC project whose cost originally estimated at Rs 220 crore is now put at around Rs 320 crore.

Ogden is one of the world's leaders in construction and marketing of exhibition centres especially in south America and in Asian Pacific region.Tacid wants the project to be commissioned by 2001 end and hopes to conclude all agreements by the end of this year.

However Bukitt Katil feels, sources say, it can take up the PECC project only if the government relents on the lease rental issue for the entire lease period of 40 years. It is still awaiting a decision from the government on this.

The Malaysian company plans to go ahead with the construction of the hotel project and sources say it could be afive or six star hotel with an outlay of Rs 300 crore which will be funded entirely by the company. The hotel will have 600 rooms with all modern facilities, it is said.