IndianOil to go ahead with Orissa refinery
New Delhi   22-Jul-2008
Company expects to complete construction at Paradeep before March 31, 2012. IndianOil Corporation plans to go ahead with its 15 million tonne refinery project at Paradeep in Orissa at a cost of about Rs 30,000 crore. The government-owned company, which has been incurring mounting losses due to its inability to pass on the increase in the global crude oil prices to consumers, is engaged in an exercise to prioritise projects. “We are reviewing projects. Those that are mandatory, like quality upgradation of petrol and diesel to meet the Euro IV norms and safety and environment-related projects, will be taken up first,” IndianOil Director (business development) BM Bansal told Financial Chronicle. India’s auto fuel policy requires the introduction of Euro III standards for petrol and diesel in the entire country and Euro IV standards in 11 cities, which at present run on Euro III fuel, by April 1, 2010. More than five years back, the R A Mashelkar Committee, on whose report the policy was framed, had estimated that around Rs 12,000 crore would be needed during the period 2005-2010 for upgrading the auto fuels. Bansal said the projects, other than the mandatory ones, would be evaluated on the basis of viability though ongoing projects would not be stalled. The company’s board is expected to take a decision on going ahead with the Paradeep refinery project shortly. “We had earlier done a feasibility study that included the petrochemical portion of the project. We are now examining whether to go in for the petrochemical project,” said Bansal. The refinery and petrochemical portion together would cost $12 billion (Rs 51,600 crore) while going ahead with only the refinery portion would cost about Rs 20,000 crore less. Another vital aspect of the Paradeep project that the company needs to take care of is completing its construction before March 31, 2012 in order to be able to avail of the seven-year tax holiday. “We will try to meet the target,” said Bansal. The Paradeep refinery would cater to the requirements of the domestic market though it would also help the country’s biggest refiner, IndianOil, to boost its capacity. The company refined about 50 million tonne crude oil last year. One of the criticism against increasing refining capacity in the country is that in a product surplus nation, there was no need for more capacity additions. The country exported about 40 million tonne of petroleum products last year and there is a view that an import-dependent industry like the petroleum sector should not expand. Bansal does not agree with this. He points out that with India being close to the crude source and the export markets in South East Asia; it is an opportunity that it should exploit. “Developed countries are not producing (petroleum products) more though their demand is increasing. Exports can increase revenue and profits and to some extent help us face the financial crunch,” he said.