NEW DELHI, September 2 (RIA Novosti) - A $260 mln Russian-Indian project to build a titanium factory in east India has been endangered by a shareholder conflict, the Indian partner in the undertaking said on Wednesday.
India's Saraf Agencies Private Ltd. holds a 45% stake in the Titanium Products Private Ltd.(TPPL), a joint venture set up to build an integrated chemical and metallurgical complex to produce titanium dioxide and other titanium products in the state of Orissa.
Russia's State Property Management Agency holds 51% in the joint venture, while the Russian company Tekhnokhim Holding controls 4%.
The joint venture, which was intended to supply 30,000 tons of titanium dioxide and up to 45,000 tons of titanium slag a year, was planned as a pilot project to use India's Soviet-era rupee debt to Russia to finance joint projects in India.
The Indian shareholder has accused the Russian partners of failing to comply with the terms of the agreement and the decisions by the venture's board of directors and is demanding compensation for its spending on the project.
"The project is at the stage it was two years ago. We have already informed the Russian side that we are exiting the project. We intend to carry on further on our own," said SM Shroff, head of Saraf Agencies Private Ltd., who is also chairman of the TPPL board of directors.
"We are seeking compensation for our expenses worth 500 million rupees [about $10 million] spent on registering a land site for ownership, on technology and other items," he said.
Meanwhile, a source familiar with the situation told RIA Novosti the Indian shareholder "has taken advantage of the unawareness of Russian directors to gain control of cash flows and the company's management."
According to the source, Saraf managed to take the land site intended for the titanium factory on lease for 90 years. After this, the land plot, contrary to the terms of the investment agreement with the Orissa authorities, was offered to TPPL for sublease at exorbitant rates.
A representative of Russia's State Property Management Agency declined to comment, saying that efforts were being made to resolve the situation.
Back in 2008, Russia transferred 2.5 billion rupees (more than $50 million) for the needs of the joint venture, although neither Saraf nor Tekhnokhim Holding had made their contributions. Only the joint venture's Indian shareholder has access to these funds, the source said.
