Addis Ababa, Feb 4 (IANS) The Ethiopian government has asked two Indian companies to resolve their dispute and start work on the construction of a $700-million sugar factory, warning any further delay could lead to termination of the contract.

Ethiopia's Minister of Finance and Economic Development Sufian Ahmed met representatives of Overseas Infrastructure Alliance and Uttam Sucrotech to deliver the stern message Jan 25.

At the meeting, which also had the presence of Ethiopian Sugar Development Agency (ESDA) general manager Belay Dechasa, the two companies were told they had to start work, which has already been delayed by three years due to a legal dispute in the Mumbai High Court, or lose the contract, an ESDA official said.

The construction of the factory is to be supervised by ESDA, which is under the Ministry of Trade and Industry (MoTI). Girma Birru, MoTI's minister, had repeatedly warned OIA and Uttam verbally and in writing to no avail. That led the case to be referred to MoFED, which signed the financial contract with Exim Bank for a soft loan.

According to reports, the project was enabled by a loan of $640 million from Exim Bank of India, granted on 1.75 percent interest. Out of this, $400 million was for the construction of the factory while the remaining was to be used for the expansion of the Fincha and Wonji sugar factories.

The construction project had different parts, including a juice extraction plant, steam generation plant, power generation plant, processing house plant, and related modernisation packages. It was stated in the bid document that whoever made the winning offer for two or more of the parts would win the engineering procurement contract (EPC).

Tenders were invited only from Indian contractors because the loan was provided by India. The Overseas Infrastructure Alliance (OIA) and Uttam Sucrotech International offered their tenders and the EPC was awarded to OIA in a contract signed Jan 10, 2007, with Tendaho Sugar Factory.

Under that deal, construction was expected to begin within 35 days. That did not happen, however, as the two companies were embroiled in a court dispute initiated by Uttam, which was not satisfied with the contract.

The sugar factory had 64,000 hectares of land which is expected to cost a total of almost $700 million. The factory is to have its own sugarcane plantation on 54,000 hectares, while another 10,000 hectares is to be developed by local farmers for the same purpose. There will also be construction of residential quarters for 40,000 workers and a dam with a capacity of 1.19 billion cubic metres of water.

All of these projects are to be undertaken by local firms, in the Afar Regional State. Only the dam is located at Tendaho, which lent its name to the factory, while all the rest are located in Dubti, another place some kilometres away.

'We are going good with the construction of the houses, the preparation of the land and the planting of the sugarcane,' Belete Alemayehu, general manager of the factory, told IANS.

The Tendaho Houses Development Agency, established under the Ministry of Works and Urban Development (MuWUD), is responsible for the construction of the houses, while the Water Works Construction Enterprise, under the Ministry of Water Resources (MoWR), is undertaking the preparation of the land and the construction of the dam. The factory is planting the cane.

(Groum Abate can be contacted at groumabate@gmail.com)