The recent increase in the excise duty on petrol and diesel has claimed its first victim. Indian Oil Corporation (IOC) has decided to postpone a decision on doubling the capacity of its six million tonne per annum Panipat refinery since it is of the view that the change in duty structure will make the expanded refinery unviable.
The matter was taken up at the IOC board meeting on January 31 where it was decided that though the government has asserted that the new duty rates will be applicable till March 31 only, it could be extended beyond that date. As the burden of the increased duty cannot be passed on to the consumer, the board was of the opinion that it would not be prudent to expand the capacity at this juncture.
The board, which has informed the petroleum ministry of its decision, was of the view that as the Oil Coordination Committee will cease to exist after the dismantling of the administered pricing mechanism in the oil sector on April 1, the oil major would be left to bear the burden of the increased excise duty on petrol and diesel even from its expanded capacity. This would further squeeze the already slim refining margins of the company.
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The state-owned Engineers India Ltd has already been awarded on nomination basis the project management consultancy job for the Rs 3,300 crore expansion project.
The Panipat refinery was first commissioned in March, 1999 after prolonged slippages. Built at a cost of Rs 3,868 crore (including marketing and pipeline facilities), the refinery has employed state-of-the-art global process technologies from IFP of France, Haldor Topsoe of Denmark, UNOCAL/UOP of USA, and Stone and Webster, also of USA, for maximisation of yield pattern, upgradation of product quality and enhancement of energy conservation.
A 301 mw thermal power plant at an estimated cost of Rs 1,528 crore has also been planned near the refinery under joint venture for which the vacuum residual fuel will be supplied from the refinery. A petrochemicals project at an estimated cost of Rs 4,056 crore has also been planned via joint venture for which the second stage clearance from the government is awaited.
The Panipat hydrocracker unit has the distinction of having the highest capacity. This unit has a processing capacity of 1.7 million tonne per annum and its technology has been adopted from Universal Oil Products, USA.