The Rs 16,047-crore (Rs 160.47 bilion) company has appointed public sector consultancy, Engineers India Ltd [Get Quote], to conduct feasibility studies for the plant with a capacity of 3 million tonnes a year that is likely to be set up near the gigantic South Pars gas field in Iran.

The largest petrochemical plant to be set up by GAIL, the project would have Reliance Industries Ltd [Get Quote] (RIL) and an Iranian government-owned company as partners, a senior GAIL official said.

RIL is the country's largest petrochemical company with a capacity of one million tonnes after it acquired IPCL [Get Quote] from the government in June 2002, which has since merged with it.

A source in the Iran embassy here confirmed that GAIL was likely to set up the plant in partnership with the Iranian National Petrochemicals Company.

"Our petrochemical company has already completed the feasibility study on the plant. GAIL wanted to do one on its own too. Our company will wait for GAIL to complete its studies," the Iran official said.

So far, however, joint ventures between Indian and Iranian government-owned companies have not been fruitful. An agreement signed two years ago by GAIL and Indian Oil Corporation [Get Quote] (IOC), India's largest oil refiner, and National Iranian Gas Export Company (Nigec) to supply liquefied natural gas (LNG) from Iran has not worked out.

Another agreement between IOC and Iran to set up an LNG liquefaction plant in Iran will not be extended after the deadline expires this month.

India is also likely to be left out of the ambitious $7.4 billion Iran-Pakistan-India (IPI) gas pipeline, which was to bring Iranian gas from the South Pars field to India.

As disagreements arose with Iran over gas pricing and transportation charges with Pakistan, India did not attend the last two meetings on the pipeline at which Iranian officials claimed major progress. A draft agreement between Iran and Pakistan is likely to be signed at the end of this month, Iranian officials claim.

On the political front, relations between the two countries have also been strained after India voted against Iran on two crucial issues at the Governors' Board of the International Atomic Energy Agency (IAEA) in 2005 and 2006 - the first time to criticise Iran for not meeting its obligations under the Non-Proliferation Treaty and the second time to report Iran's file to the UN Security Council for possible possession of weapons of mass destruction.

GAIL will also set up another petrochemical plant in south India with a capacity of 1 million tonne a year. That plant is likely to come up at Vishakapatnam near Hindustan Petroleum Corporation's [Get Quote] refinery. GAIL officials, however, declined to disclose the possible investments in that plant.

The company operates a 440,000 tonnes a year petrochemical plant at Pata in Uttar Pradesh. It had planned another plant at Kochi, which is yet to start.