BRPL may improve capacity utilization after merger with IndianOil
New Delhi   31-May-2008
Bongaigaon Refinery and Petrochemicals Ltd (BRPL) may go for higher capacity utilization by using imported crude following merger with parent IndianOil. Proposals for capacity escalation may also be considered. The merger proposal is already approved by the shareholders of both the companies and is now awaiting clearance from the Union Government. According to sources, while the IndianOil group is making fast moves in improving crude availability in its refineries in Assam, higher crude processing would inflate BRPL's sales tax under-recoveries now amounting to approximately Rs 80 crore a year generated out of double taxation during the inter-State transfer of products. Unlike many other commodities, oil products do not enjoy Modvat (modified value-added tax) benefits The 2.35-miIlion tonne refinery is currently processing 2 million tonnes of crude. Since North Eastern region has a much lower appetite for refined products compared to the existing refining capacity, larger part of the products are transferred to IndianOil for marketing through the tatter's Siliguri terminal in West Bengal, leading to double taxation of products of which only half is recovered from the customer. The underlying situation makes it imperative that higher sales would increase BRPL's Central Sales Tax under recovery. The situation, however, will change once the refinery becomes a part of IndianOil as stock transfers within the company are not subjected to such double taxation. <b>Importing Less</b> According to sources, though IndianOil has already established logistics for supply of cheaper imported crude through IndianOil-owned crude pipeline between Barauni in Bihar and Assam, BRPL is importing a mere 0.3 million tonnes of crude, primarily for replacing the use of Assam crude. The imported crude supply logistics would improve with the commissioning of Paradip-Haldia crude pipeline connected up to Barauni through the existing Haldia-Barauni pipeline. While studies are underway for further improving the crude supply logistics in Assam, IndianOil may be waiting for the merger for implementing the proposals. Since refining capacities in Assam avail 50 per cent excise duty exemption, leading to very high refining margin, better crude supply and product evacuation plans may also offer IndianOil the opportunity of using Guwahati and Bongaigaon as refining hubs.