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Journalism of Courage
MUMBAI, Aug 2: The board of Indian Oil Corporation has given the go-ahead to set up a 9-million-tonne refinery along with Madras Refineries at Nagapattinam in Tamil Nadu. The board of directors of Madras Refineries is likely to clear the project some time this week.
The ministry of petroleum and natural gas will then take up the project for first-stage approval. Consequently, a feasibility report will be prepared, which will examine a host of other physical parameters linked to the refinery. This will include the possibility of setting up a power plant and other allied facilities like a crude pipeline.
The project, conceived more than two years ago as an 100 per cent export-oriented unit, had initially envisaged a capacity of 3 million tonnes, which was later increased to 6 million tonnes. The partners now feel that it makes greater sense to put in place a 9-million-tonne refinery given the economies of scale.
While there is no indication yet about the shareholding pattern, sources say Indian Oil andMadras Refineries will hold 26 per cent equity apiece in the project, while the rest will be offered to the public and financial institutions.
There have been unconfirmed reports of Petronas of Malaysia being roped in as a third strategic partner, though experts say this is highly improbable given the present unattractive returns in investing in a refinery. This has been compounded by the fact that worldwide, refineries have been incurring huge losses, prompting players like Shell and Saudi Aramco to take a good, hard look at their own plans for a refinery in the country.
The Nagapattinam refinery is, however, unlikely to be commissioned before the Ninth Plan, which ends in 2002. This is because there will be time lags in preparing the feasibility report and in getting a fair idea of the cost of the project.
Interestingly, Petronet India, the joint venture pipelines company, is preparing a feasibility report for a pipeline from Chennai to Madurai via Tiruchi. The equity arrangement will involve IOC andPetronet picking up 26 per cent in the project, while MRL will have the option of taking a stake of up to 23 per cent.
The pipeline is expected to be ready well before the Nagapattinam refinery is commissioned and will be an ideal mode of transport for its products in addition to MRL’s own refinery at Manali near Chennai.
To IOC, the project will mean getting a foothold in the south, where it does not have a presence now. Most of its refineries are located in the north, where it is virtually the leader apart from a small presence in the north-east. The tieup with MRL will ensure that IOC begins building up a base for its operations in a totally deregulated scene which, according to the Nirmal Singh Committee’s recommendations, will be in place by 2002.
Manali power unit capacity hike on the cards
MRL is exploring the option of enhancing the capacity of its power plant at Manali from 250mw to 350mw. This could even be eventually increased to 500mw. The company’s 1996-97 annual report mentionedthat the fuel for the then Rs 1,100-crore project would be refinery heavy residue.
MRL is also working towards increasing the capacity of its Manali refinery by 3 million tonnes to 10 million tonnes. This, according to the annual report, will involve an outlay of Rs 2,000 crore and envisages the setting up of a hydrocracker unit as the main secondary-processing facility.
However, sources say the partners will be keen to avail themselves of the benefits announced in the budget of granting a five-year tax holiday for refineries commissioned between October 1998 and 2003. This, incidentally, will also be applicable to power projects, and has prompted players like the ONGC to consider setting up plants with the National Thermal Power Corporation.
