Numaligarh Refinery To Affect Crude Supply To Brpl

The setting up of the Numaligarh refinery in Assam would affect the crude oil supply to Bongaigaon Refinery & Petrochemicals Ltd (BRPL), impeding its further expansion plans, according to the disinvestment commission.

Suggesting that the government's equity be diluted to 26 per cent in the refinery, the commission said crude availabilty is a major constraint, due to which Bongaigaon Refinery's capacity utilisation has been below 50 per cent. Having a total share capital of Rs 199.82 crore with government holding a share capital of 74.5 per cent, the company's share price is low when compared with companies like Cochin Refineries Ltd, Madras Refineries Ltd and IPL, it said. The commission has said the under-utilisation of capacity has been mainly due to restricted availability of crude production in Assam as the average oil production in the state past five years has only been 4.83 million tonnes while the refining capacity drawing on Assam crude is about 7.65 million tonnes at present.

 

The other area of concern is that the company has been inherently suffering from marketing disadvantages because of its distance from its main market for the refinery products, as well as, petrochemical products. 'This will be a major disadvantage under the liberalised regime with phasing out of administered price mechanism (APM) and Bongaigaon Refinery will have to incur considerable expenditure in setting up these facilities.

Bongaigaon Refinery has to cater to a long-distance market as there is already an oversupply situation in the northeastern region,' the commission said.

It further said Bongaigaon Refi- nery has been suffering due to higher fuel consumption, which has to be improved.

It cited the example of HPCL, saying the per unit consumption of crude by Bongaigaon Refinery has been 69 mt per 1,000 million as against HPCL's usage of only 27 million tonnes.

The commission has, therefore, suggested it would be desirable to associate a strategic partner in the company's operations to enable it to make necessary investment to improve its operations and, more importantly, provide access to marketing techniques.

It has called upon to reclassify it as a non-core public sector undertaking, keeping in view the company's special locational problems and a vital need for strong organisational and marketing inputs for its survival.

The commission has recommended that a strategic sale of 50 per cent of shares of Bongaigaon Refinery may be offered immediately to Indian or foreign oil companies, either on their own or in association with one another.

The percentage of shares to be acquired by the successful bidder, together from the public and the government to make up 50 per cent holding, should be in accordance with Securities & Exchange Board of India's requirement, the commission said.