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Indian Oil plans Rs 40K-crore mega refinery at Nagapattinam

Business Standard:  March 02, 2017

State-run Indian Oil Corporation (IOC) plans to come up with a 15-million-tonne (mt) refinery, with an investment of about Rs 40,000 crore, at Nagapattinam in Tamil Nadu.

“We are planning to expand the 1-mt plant to 9 mt during the first phase, and will later expand it to a 15-mt mega refinery,” said an official source close to the development.    

National Iranian Oil Company (NIOC) has a 15.4 per cent stake in CPCL, which runs two refineries — 10.5-mt Manali plant in Chennai and Nagapattinam refinery in Cauvery Basin. 

Though there was a plan to merge CPCL with its parent company, a decision is yet to be taken by the government on what will happen to the Iranian stake in the firm. CPCL has a huge land bank in Nagapattinam, which prompted the company to plan such mega investments.   

This comes at a time when the viability of another 15-mt refinery of IOC in Odisha is under cloud. The Odisha government has decided to withdraw the fiscal incentives for the Rs 34,000-crore plant.  

According to the state government, it would lose Rs 22,745-crore revenue, at present value, if it allowed the company to defer paying value-added tax on the refinery’s produce sold in the state for the first 11 years. On the other hand, the company claims it to be in the range of Rs 8,000-9,000 crore. However, this decision is likely to have an impact on IOC’s other planned investments worth Rs 50,000 crore in the state.    

The state government is of the view that the project that was initially planned for 9 mt was later expanded to 15 mt, which increased the company’s profitability. 

According to the Odisha government, the profitability of the refinery increased because of low crude oil prices too. 

Prime Minister Narendra Modi dedicated the refinery to the nation in February 2016 and it is now operating at 

90 per cent capacity. Including the 15-mt capacity at Paradip, India has a total of 230-mtpa refining capacity. 

Of this, public sector majors hold the majority share with 150 mt, while private sector players have a capacity of around 80 mt.   

The government later divested its stake in the company over the years and IOC took over the government equity in the company in 2000-01 as part of the restructuring.  

The state-run major currently holds about 52 per cent stake in the company.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.