Higher project costs force IOC to raise capex by 22%

Spending target raised to Rs 53,000 crore for 2007-12.

The capital expenditure of Indian Oil Corporation (IOC), the country’s largest oil marketing company, has been revised upwards by 22 per cent to Rs 53,000 crore for the Eleventh Plan Period (2007-12). The original outlay was Rs 43,400 crore. While most of this is due to higher project costs, an investment of about Rs 1,400 crore has been earmarked for new projects.

“The cost escalation has been mainly due to foreign exchange variation, firming up of project scope and general price rise in equipment and machinery. The overall increase in outlay during the mid-term assessment of the eleventh plan comes to only 14.5 per cent so far as the continuing projects are concerned. Another 7.5 per cent increase has come on account of new projects,” said a company official.

The upward revision would be mainly on account of large projects such as the Paradip refinery, naphtha cracker plant (Panipat) and residue upgradation project at Koyali refinery.

Of the Rs 53,000 crore, the company is investing Rs 37,220 crore in its refining and marketing segment, Rs 14,000 crore in petrochemicals and Rs 1,775 crore in exploration and production.

As on July 30, the company had achieved 43.5 per cent of the five-year project target. Paradip-Haldia crude oil pipeline, Panipat-Jalandhar LPG pipeline, Koyali-Ratlam product pipeline are the major projects completed.

IOC has planned a capital outlay of Rs 15,000 crore for 2009-10. It has also signed an agreement with Nuclear Power Corporation of India for a joint venture company to build nuclear power plants. The company could be investing around Rs 1,000 crore in the venture.