Indian Oil Corporation looks forward to Paradip refinery

Commissioning due in 5 months, though full supply pipeline and clearances awaited; with proposed PCPIR, hope for spurring development of region

With a little over 90 per cent of the construction work complete, the Paradip refinery project of Indian Oil Corporation (IOC) is on the road to start production from September this year. The 15-million tonne (mt) refinery, tipped to be the first zero-residue one in the country, is being built at a cost of Rs 29,777 crore, to cater to the rising demand for oil products in eastern India.

It was conceived to process 100 per cent heavy high-sulphur crude, which is cheaper, for better profitability. It would be the 11th refinery under IOC, pushing its refining capacity to a little over 80 mt a year and the share in national refining capacity from 31 per cent to 37 per cent. Apart from meeting the rising domestic demand for cooking gas, petrol, diesel, aviation fuel and other petroleum products in eastern India and beyond, it will produce petrochemical feedstock such as propylene for nearby units.

These days, said a source, a standalone refinery is not an attractive proposition unless linked to auxiliary industries. The refinery is being promoted as the anchor tenant for the PCPIR (Petroleum, Chemical and Petrochemical Investment Region) hub to be set up in 70,214 acres of land spread over Jagatsinghpur and Kendrapara districts. The refinery and the PCPIR hub, envisaging combined investment of Rs 55,000 crore, are meant to unleash growth potential for ancillary and downstream industries in the region, acting as an economic stimulus for industrial development, said a company official.

Like other big projects in the region, it has been a long and bumpy ride for the refinery. The foundation stone was laid in May 2000, by then prime minister Atal Bihari Vajpayee. Initially, planned as a six mt refinery at an estimated investment of Rs 8,300 crore, IOC had later ramped up the capacity to nine mt and finally to 15 mt, to achieve better economies of scale. At the beginning, the project was delayed due to dallying by the Odisha government on tax concessions. Though the state eventually agreed to defer sales tax collection for a period of 11 years, the subsequent downturn in the oil market, land and labour problems, and delay in commissioning of the captive power plant pegged back the project implementation, resulting in time and cost overrun.

The refinery work began in real earnest in 2009. As it nears completion, the project is still not free from worry. While a case relating to sourcing of water from the Mahanadi river at Jobra is still pending in the Supreme Court, the work on the 1,100-km Paradip-Ranchi-Raipur pipeline planned to carry finished products to consumers in Odisha, Jharkhand, Chhattisgarh and Madhya Pradesh is yet to be completed. A portion of this pipeline within Odisha awaits final forest clearance approval from the Union ministry of environment and forests. "This needs to be in place for the viability of the project", M Vijayvargiya, executive director for the project, said recently. Until the pipeline is ready, the company intends to depend on traditional transport to supply refined products.

Infrastructure apart, local law and order and labour issues have been major worries. "We were not getting the required number of labour due to law and order situation and that is why there was delay," said Vijayvargiya. There is also frequent labour unrest due to multiplicity of labour unions (more than 20), most of which are backed by political leaders.

In a year, the refinery would produce 5.97 mt of diesel, 3.4 mt of petrol, 1.45 mt of kerosene/aviation fuel, 536,000 tonnes of cooking gas, 124,000 tonnes of naphtha and 335,000 tonnes of sulphur, all for the domestic market.