The integrated complex will be saddled with around around 120 mw excess power when fully operational, and ancillary units will ensure offtake of the excess power as well as corex gas.

Reversing its earlier decision, JVSL has now decided to offer land, corex gas from the steel plant and power from its joint venture subsidiary as equity to the new company being floated in association with the partner. In the process, JVSL, which is facing a liquidity crunch, will not have to make a cash contribution to the equity of the fertiliser unit.

"The equity participation of JVSL will be marginal in the new entity. The new development is in line with the strategy of the Jindal group to focus on steel as our core business in the country. In the near future, we will refrain from furtherdiversifications," Sajjan Jindal, managing director of JVSL told The Financial Express.

Jindal said the group was also looking at the possibilities for a strategic alliance with an existing urea manufacturer without picking up any equity. The actual business model for the purpose is being finalised, he added.

The business plan behind the move is to optimally utilise the proposed Corex II unit of Jindal Vijayanagar Steel plant at Toranagallu in Bellary. Once the second unit becomes operational, the cost of production of steel from JVSL will come down which would reflect in its bottomline.

"Our oxygen, in association with Praxair of US, produces nitrogen and hydrogen which can be utilised as raw materials for manufacturing urea. In addition to that, JVSL could supply land and power at economical rates to the partner in the form of equity. Soon we will talk to Karnataka government officials to offer the land for establishing the urea facility," Jindal added.

The OP Jindal group had dropped itsplans for a greenfield urea production facility in Karnataka which would have entailed an investment of Rs 1,000 crore. The group was in the process of floating a new company - Jindal Vijayanagar Fertilizers Ltd - for the purpose.

In fact, the group had completed the formalities of registration, location, etc to set up the facility in Toranagallu. The severe pressure put by financial institutions has prompted the group to put its plans on the backburner. Jindal Vijayanagar Fertilizers was looking at both foreign and domestic debts to fund the project, in addition to group funding.