New Delhi, June 9: Haldia’s loss is turning out to be Paradip’s gain.
Indian Oil Corporation (IOC) is now chalking out plans to invest another Rs 6,000 to 7,000 crore in a petrochemicals project on the east coast alongside the Paradip refinery.
The Bengal government had refused to respond to the oil company’s offer of a Rs 5,000-crore package to develop Haldia as a petrochemicals hub in the east, provided it was given management control of Haldia Petrochemicals Ltd.
A senior IOC official said the new petrochemical plant is likely to come up along with the Rs 11,000-crore Paradip refinery as there is considerable synergy between the two projects.
The IOC investment package for Paradip will now go up to Rs 17,000 to 18,000 crore, which could be touted as a big achievement by Orissa’s Naveen Patnaik, the only chief minister who could withstand the anti-incumbency wave in this year’s elections.
The Buddhadeb Bhattacharjee government was reluctant to concede IOC’s demand for management control of Haldia Petrochemicals for two reasons.
First, Purnendu Chatterjee, who holds 43 per cent stake in the petrochemicals company, was not keen on the IOC proposal. Second, the Bengal government had started negotiations with GAIL, which is expected to pick up 10 per cent shares in the company.
Like Chatterjee, the Bengal government holds 43 per cent shares while the Tatas used to have 14 per cent stake in the company. However, the Tatas now retain only a nominal 4 per cent, having transferred 10 per cent shares to the Bengal government. This 10 per cent has been earmarked for GAIL.
GAIL is supposed to invest around Rs 400 crore in Haldia Petrochemicals in two phases but the proposal is now pending before the Public Investment Board.
IOC has already given a commitment to complete the Paradip refinery by 2009-10 but is willing to bring the deadline forward to 2008-09 if the demand for petroleum products picks up to justify the move.
The formal agreement between IOC and the Orissa government was signed in February with the state government agreeing to restore all tax concessions that the oil company asked for earlier. These include deferring sales tax for 11 years and exemption of entry tax on crude oil to be processed at the refinery.
Petrochemicals is the new thrust area for IOC as it wants to move up the value chain of converting petroleum products such as naphtha into petrochemicals. The company has drawn up a Rs 30,000-crore plan for integration into petrochemicals based on captive streams from its own refineries.
Petrochemicals has emerged as the second biggest area of investment for IOC, next only to its mainline refinery business.