Whether it be the unwillingness of the Indian partners to increase their exposure or the problems in raising debt for the project, they all can be said to be the result of the international over-supply of the nutrient.

However, the minister would do well not to take a fresh view on the project merely based on the current urea prices. Currently, urea capacity in the country stands at around 195 lakh tpa while the consumption stands at about 220 lakh tpa. Demand is expected to grow at around 6-7 per cent per annum during the next five years. This means that by 2003-04, demand for urea may grow to around 250-300 lakh tonnes. The ongoing capacity additions in the industry will enhance production capability by about 9.75 lakh tonnes in the next three years.

While Chambal Fertiliser & Chemicals' Rs 1,256 crore expansion at Gadepan (Rajasthan) will add 7.75 lakh tpa this financial year, Duncan Industries' Rs 636.38 crore project which should go on stream May 2003, will enhance domestic capacity by another 2 lakh tpa. Therefore, by 2003-04, the gap between demand and the domestic installed capacity for urea will widen from 25 lakh tonne to over 50 lakh tonne.

While one may argue that it would be far cheaper to import urea than to put up any fresh capacity for the project, it may not necessarily be so. It is a known fact that urea prices are demand-supply driven and not cost-driven. If India were to begin importing significant amounts, prices could rise once again. The Indo-Oman fertiliser complex can add another 14.5 lakh tonne to domestic supply and its commissioning would help the country become self-sufficient as far as urea is concerned.

This is not to say that the project does not need to be reviewed. In fact, the terms of the contract that require the Indian partners to shell out the difference between the base price and the prevailing international price (in case international prices are lower - which incidentally, are) need to be seriously looked at.