IOC to spend Rs 2,000 cr on alternative energy
New Delhi   12-Aug-2010

Country’s largest oil-marketing company, IndianOil (IOC), will spend Rs 2,000 crore in next five years to develop power projects based on alternative sources of energy like tides, solar, nuclear and wind.

IOC seems to have planned the diversification into tapping non-conventional energy resources based on assessment that growth in retailing of petroleum products will be limited with entry of private and foreign players.

“These (alternate sources of energy) are potential opportunities coming. IOC as an integrated energy company needs to capture them,” IOC chairman Brij Mohan Bansal told Financial Chronicle.

The company has set aside Rs 2,000 crore for newer portfolios such as solar, wind and nuclear energy among others, the chairman said. IOC is on look out for sites to set up solar and wind power projects in states like Rajasthan and Tamil Nadu.

At present, it operates 21 mw wind power facility in Kandla. The power generated is currently used for captive utilisation in its refineries. On a later date, IOC plans to commercially market power generated from its solar and wind farms.

IOC is one of the companies that have registered for roof-top based solar power projects and grid-connected ventures.

“This (diversifying into newer alternate energy portfolios) is a healthy trend that is happening globally. It will not have much impact on company’s revenues at this stage. But, it will add to the company’s bottom line in 10-15 years from now,” Dilip Khanna, partner (oil and gas practices) at Ernst & Young, India.

IOC reported a gross turnover Rs 77,965 crore in April-June quarter of 2010-11. The refiner’s turnover touched Rs 271,074 crore in previous fiscal, while profit after tax was Rs 10,221 crore. It garnered revenue worth a very modest Rs 10 crore from its alternate energy portfolio in 2009-10.

When asked about the growth in downstream sector, Khanna said, “If the economy is growing at around eight per cent, the downstream sector should also grow at four-five per cent.” The overall petroleum products consumption in the country grew at 3.4 per cent during 2009-10.

Looking into the future, India must look at alternate sources of energy, said R S Pandey, former petroleum secretary. “We must find a substitute to crude oil in the long run. Alternate sources of energy such as solar, wind must be developed,” Pandey added.

Scope for setting up wind power projects is limited, while there is more potential in solar power, Bansal indicated.

Prime Minister’s national solar mission has targeted 20,000-mw solar power generation capacity by 2022. The mission targets to attract investments into the capital-intensive sector, resulting in setting up of dedicated manufacturing capacities for poly-silicon material. Phase-I of the mission closes in 2013 and targets addition of 1,000-mw grid connected solar capacity.

Meanwhile, IOC will form a joint venture (JV) for its nuclear initiative with Nuclear Power Corporation of India (NPCIL) in next two months, Bansal said, without divulging details of the JV.

IOC scrip at the Bombay Stock Exchange on Wednesday surged 1.35 per cent and closed at Rs 376.20.