The Telegraph
Since 1st March, 1999
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Indian Oil goes slow on Paradip refinery

New Delhi, May 3: Indian Oil Corporation has decided to go slow on the Paradip refinery as the project cost has shot up to Rs 12,400 crore from the initial figure of Rs 8,312 crore and the demand for petroleum products is not growing at the anticipated rate. This has adversely impacted the economics of the project.

Reliable sources disclose that IOC has “committed” an investment of only Rs 1,050 crore in the project at this point in time. An expenditure of Rs 558 crore has been incurred on pre-project activities such as dredging and reclamation of the 3,347 acres of land that has been acquired for the refinery on the eastern coast in Orissa. Building bridges across Santra creek and the approach road to national highway-5A also form part of this pre-project investment.

Sources disclose that while IOC will definitely go through with the project the schedule will be “of its own choosing” and determined purely on economic considerations.

The Orissa government is also being blamed for the delay in the project as it first granted tax concessions to the tune of Rs 4,039 crore and then did a volte-face by suddenly withdrawing most of them.

The gigantic 27 million tonne refinery built by Reliance Industries at Jamnagar is another important factor that has upset the demand-supply balance in the petroleum sector which has caused a glut in petro goods. This has naturally impacted the viability of the new grassroots projects as well as the expansion of the existing refineries.

The Paradip refinery is also considered important from the strategic standpoint in so far as the Defence Ministry has been pointing out that there is an excessive concentration of oil installations on the western coast.

While the projected rate of growth of petroleum products had earlier been worked out to 7 per cent in recent years the growth has slowed down to 3.5 per cent.

According to sources the Petroleum Ministry has worked out two scenarios for setting up of new refining capacity in the 10th plan period (2002-07).

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