Gail asked to consider building Assam Cracker

Twelve years and a weatherbeaten foundation stone. That’s what has taken the Centre to realise that it needs another promoter to set up...

Twelve years and a weatherbeaten foundation stone. That’s what has taken the Centre to realise that it needs another promoter to set up the much-promised Assam Gas Cracker project.

On Assam Government’s persuasion, the Finance Ministry has finally asked a public sector undertaking (PSU) to promote the ambitious Rs 36-billion petrochemical project even as Reliance Industries finds one legitimate reason which dents the project’s economics. On February 20, a meeting presided by Additional Secretary (Expenditure) asked Gail (India) Limited to ‘‘examine the feasibility of taking up the project on its own’’.

He has given Gail time until June 20 to come up with a long-term alternate plan, wherein ‘‘GailL would also indicate the assistance needed from other PSUs like Oil and Natural Gas Corporation (ONGC), Oil India Limited (OIL) and Indian Oil Corporation (IOC) and the support required from Government of India for setting up of the project,’’ states a government paper.

The plan must include ‘‘the possibility of and the social and economic scope and benefits of possible downstream industries’’ as well as the inability of the Assam Industrial Development Corporation in contributing 11 per cent equity as the Assam government lacks resources even of running the state. Although Reliance has not officially abandoned the project, it has raised pertinent issues one after another that has stalled the start of construction since the foundation stone was laid in 1995 by the then Prime Minister PV Narasimha Rao.

The project was conceived as follow up of the 1985 Assam Accord. In 1992, a group headed by Principal Secretary to the PM assessed the cracker’s ethylene capacity at two lakh tonne based on the availability of natural gas. To neutralise the additional cost of setting up the project in a remote area, the group approved a capital subsidy of Rs 377 crore and supply of cheap gas at Rs 600 per thousand cubic metres for 15 years.

Along came Reliance Industries Limited in May 1994 as the lead promoter with 40 per cent equity and in 1997, additional concessions were sought and agreed upon.

These included supply of gas, when available, for an additional one million tonne ethylene extraction at subsidised northeast price, infrastructure subsidy of Rs 72 crore to Oil India Limited for setting up the gas supply network and transfer of Gail (India) Limited’s LPG separation plant at Lakwa to Reliance at price determined by an independent agent.

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Then began the gas supply hassle. Reliance insisted on getting the full gas linkage before undertaking any activity. What is readily available is gas from OIL but that is just enough for 1.3 lakh tonne ethylene. Gas for the remaining 0.7 lakh tonne ethylene was to be supplied by ONGC. ONGC too was ready to ink the gas supply agreement but for a demand by Reliance for payment of liquidation damages in case ONGC failed to meet the balance gas requirement. Providing LPG as an alternate feedstock would jack up the subsidy component by another Rs 200 crore per annum taking the total subsidy provision for 15 years to Rs 4,950 crore, which would have to be provided from the Central Budget.

The project, to be located at Lepetkata in Dibrugarh district, has become a sentimental demand for over a decade in Assam. The people expect the cracker to usher in an industrial revolution. numerous review meetings have been held over the last 12 years and several new deadlines fixed to speed up the project’s progress. Maybe a change of horse would help.