The delay in the implementation of the nine million tonnes per annum east coast refinery of the Indian Oil Corporation (IOC) at Paradip in Orissa has resulted in the project cost going up by 50 per cent.
Petroleum Minister Ram Naik informed Orissa Chief Minister Navin Patnaik that the project cost had gone up from the originally approved Rs 8,312 crore to Rs 12,400 crore.
Naik said since the viability of the project was based on the availability of tax concessions and incentives granted under the Orissa government's Industrial Policy Resolution, 1996, their withdrawal in February 2002 affected the project adversely and IOC could not proceed with it further.
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The concessions under the Orissa government's Industrial Policy Resolution, 1996, included 11 years' sales tax exemption.
Naik said though in July 2001 the state government had approved a revised package of incentives for the project, it amounted to only 32 per cent of the concessions given earlier.
"As per an appraisal by ICICI, the project may not be viable and its funding may become difficult with the revised package of incentives," Naik said.
IOC has so far completed the basic design for process units and has acquired 3,347 acres of land for the project.
It has also completed pre-project works like dredging and reclamation, building bridges across Santra creek and an approach road from the national highway 5A.
As per the original government approval, the Paradip project was scheduled to have been completed within 48 months from the date of government approval, which was July 14, 1998. However, IOC has not yet fixed the new date for completion of the project.
The other reasons for delay in its implementation are withdrawal of joint venture partner, Kuwait Petroleum Corporation, from the project and a dip in the demand for petroleum products.
While the Plan document had projected an all-India demand of petroleum products at 155 million tonnes per annum (mmtpa) in 2006-07, it was revised to 148 mmtpa in the Hydrocarbon Vision 2025.
However, as per the latest outlook, the demand has been reassessed at 120 mmtpa in the low-demand scenario and 132.5 mmtpa in the optimistic scenario, considering a compound annual growth rate of 3.7 per cent and 5.7 per cent, respectively.