March 29, 2024 [Economic Times]-State-owned Indian Oil Corporation (IOC) on Thursday said it will raise its stake in the joint venture building a 9 million tonnes refinery at Chennai to 75 per cent after the cost to the project escalated by over 12 per cent. Originally, IOC and its subsidiary Chennai Petroleum Corporation Ltd (CPCL) were to hold a 25 per cent stake in the joint venture that was to build a new unit adjacent to the existing refinery of CPCL. The remaining 50 per cent equity was to come from financial investors.
In a stock exchange filing, IOC said its board at its meeting on Thursday “accorded approval for the revision in cost of the project from Rs 29,361 crore to Rs 33,023 crore”.
The cost increased Rs 3,662 crore or 12.5 per cent.
“The Board has also accorded approval for revision in the capital structure of the joint venture with 75 per cent equity from IndianOil and 25 per cent equity from CPCL,” it said.
The company however did not give reasons for the cost escalation.
IOC said its board had on January 29, 2021 approved the implementation of a 9 million tonnes a year refinery at Cauvery Basin, Nagapattinam in Tamil Nadu by CPCL at an estimated cost of Rs 29,361 crore, to meet the demand of petroleum products in southern India.
Alongside, approval was also given for the formation of a joint venture between IOC and CPCL with equity holding of 50 per cent and balance 50 per cent to be held by financial/strategic/ public investors. Thereafter, the joint venture company named ‘Cauvery Basin Refinery and Petrochemicals Ltd’ (CBRPL) was incorporated on January 6, 2023.
The unit was to come up in 48 months.
IOC had planned to pull down the 1 million tonnes a year Nagapattinam refinery of its subsidiary CPCL and build the brand new 9 million tonnes unit.
National Iranian Oil Co (NIOC) is not a partner in the project.
NIOC holds 15.4 per cent in CPCL and was previously keen to participate in the expansion project. However, US sanctions on Iran had put constraints on that.
NIOC’s investment in CPCL had been made several years back and that as such will not draw any impact of US sanctions but the impact of fresh investment in the company could have risked sanctions.
IOC holds a 51.89 per cent stake in CPCL.
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