ADDIS ABABA, ETHIOPIA (Addis Fortune) — A high-level Ethiopian government delegation led by Girma Birru, minister of Trade and Industry (MoTI) left for India last Friday to discuss sugar development projects the latter finances after the Indian financer released the fund for the project, knowledgeable sources disclosed.
The delegation will meet senior officials of the Indian government and authorities at the Export and Import (Exim) Bank of India about the commencement of the construction of the Tendaho Sugar Factory in Tendaho area of the Afar Regional State, and the expansion works on Fincha and Wenji – two of the three existing sugar factories in Ethiopia.
Progress on both the expansion and the brand new sugar development projects has, for a long time, been stalled due to controversy between Indian companies that competed to be contractors for the construction and machineries installation of the projects.
Girma led the delegation to India following an invitation from the Indian government, the sources said.
The frequently delayed sugar development projects are expected to takeoff as Exim Bank has agreed to release the funds.
The long delay besieged the projects as Uttam, the Delhi-based sugar plant machinery manufacturing company, which has a subcontract for Tendaho Sugar Factory, has been in dispute with Overseas Infrastructure Alliance (OIA), an Indian private company that had won the Engineering, Procurement and Construction (EPC) for it, and subsequently took the case to the Bombay High Court.
The dispute arose because OIA requested a 15pc administration cost from the subcontract winners, and wanted to receive all the incentives the Indian government provides to its export companies.
Finally, through the intervention of the Indian Government, the conflict between the two companies was resolved.
The state-owned Exim Bank of India provided 640 million dollars in soft loan at an interest rate of 1.75pc, in accordance with the agreement signed by the two governments, which requires that 85pc of the construction work be done by Indian firms.
Tendaho and Fincha Sugar factories signed an EPC contract with OIA on January 10, 2008. Overseas should have begun construction within 36 days of the agreement. Even after a year, however, nothing has yet been started on.
Girma had become well known among the interested Indian firms, the media and authorities and business who closely observed the issue, for the frequent warnings he has given the Indian companies that the project should commence as per the terms of agreement signed. However, the warnings did not seem to achieve much until such time that the dispute between the two Indian companies was resolved following the intervention of the Indian government.
The Ethiopian government floated an international tender in October 2006 for the construction of the new Tendaho Sugar Factory in Tendaho area of Afar and for the expansion works on Fincha and Wenji.
These projects require about 15 billion Br, though that figure has climbed to 17 billion Br due to inflation, of which the amount to be spent on factory construction and machineries installation was secured from the government of India.
More than 20 Indian companies had contended in the October 2006 tender and OIA was awarded the EPC for Tendaho and Fincha, while Uttam won that for Wenji’s.
Separate parts of the factories (four to six packages) were listed for companies specializing in the specific parts to contend for each, and those who won two or more of the tenders would be awarded the EPC contract. The EPC contractors were expected to then sign sub-contract agreements with them.
Though Uttam’s accusation is only in relation to the Tendaho project, the Wenji and Fincha projects were also stuck because the charge led to the suspension of funding of the projects by Exim.
Tendaho, which cultivates 64,000hct of land alone, shares eight billion Birr of the total projected cost.
The Tendaho dam, the largest dam constructed by the state-owned Ethiopian Water Workers Enterprise (WWCE), has a capacity to hold 1.8 billion cubic metres of water. When completed, the Tendaho factory will have the capacity to crush 26,000tn of sugar cane, the largest capacity in Africa.
Fincha also envisages upgrading its production capacity from one million to 2.7 million quintals a year. The difference is what the three sugar factories under expansion are currently producing.
Fincha would undertake the expansion on Fincha River and on Amertineshi Dam, which is under construction by the Ethiopian Electric Power Corporation (EEPCo). It is expected to develop 5,000hct of land.
(By Amanyehun Redda, Addis Fortune)