Indian Oil to expand Paradip refinery despite stand-off with Odisha

Firm to spend Rs 4,500 cr to roll out BS-VI petro products

Unfazed by the stand-off with the Odisha government over grant of fiscal incentives to its Paradip crude oil refinery, Indian Oil Corporation Ltd (IOCL) is planning for expanding the capacity of the refinery from 15 million tonne per annum (mtpa) currently to 20 mtpa and beyond.

"We are looking into the expansion of the refinery. The oil industry works on a narrow margin. We may go for expansion (of the Paradip refinery) to 20 million or beyond. We intend an investment of Rs 4,500 crore to upgrade the Paradip refinery to roll out petroleum products that would comply with BS-VI emission norms", Sanjiv Singh, director (refineries) of IOCL told Business Standard.

The proposed expansion plan is aimed at generating more cash flow and improving operating margins. However, the company official declined to commit the timeline for expansion.

As per the original pact signed between the Odisha government and IOCL in February 2004, the government had allowed deferment in VAT payment by the Paradip refinery for a period of 11 years from the date of commercial operations of the project. The incentive was offered to ensure commercial viability of the refinery whose original capacity was pegged at nine mtpa.

Later, IOCL redrew the project design and expanded capacity to 15 mtpa. The capacity expansion coupled with the delay in commissioning of the project by the oil major prompted a red faced Odisha government to withdraw the incentive. The government rescinded the notification for VAT deferment and served a notice on the oil company for payment of pending VAT amounting to Rs 1485 crore. IOCL contested the notice of the government in the Odisha High Court which has kept in abeyance the demand notice and allowed a working group two months time to settle the row. The working group formed to break the deadlock between the two sparring parties (Odisha government & IOCL), is chaired by the secretary, Union minister for petroleum & natural gas and has representation from the Odisha government and IOCL.

IOCL, has clarified that the spat with the Odisha government would not hurt the progress of the petrochemical complex which was planned concomitantly with the oil refinery. IOCL has invested Rs 35,000 crore on the refinery and has committed an investment of Rs 34,000 crore on the petrochemical complex. The refinery cum petrochemical complex together with the pipeline projects make IOCL the biggest investor in Odisha.

The first petrochemical unit of IOCL -- the polypropylene complex in which IOCL is investing Rs 3,150 crore -- is under construction, and is expected to be operational within one year.

The oil marketing company has also got the in-principle approval of its board to set up a second unit -- the monoethylene glycol plant at a cost of Rs 4,000 crore.

"The technology approval for the MEG plant has been done. We expect final approval for the project at the earliest. We are looking at more downstream projects. We are not slowing down on these projects coming up the complex", Singh said.

Two more projects have been planned for the petrochemical complex -- 1,200 ktpa purified terephthalic acid (PTA) plant and petcoke gasification-based synthetic ethanol plant. Both these projects would together cost IOCL Rs 28,000 crore and are due to be commissioned by September 2021.

With the availability of mono ethylene glycol (MEG) and PTA from these units, downstream industries like polyester chips, fibers, PET (polyethylene terephthalate) grade chips, PET film grade chips and polyester industrial yarn can be developed.