Date:21/04/2007 URL: http://www.thehindubusinessline.com/2007/04/21/stories/2007042105190200.htm

Back No headway in NRL capacity expansion, IPO plans

Pratim Ranjan Bose

Kolkata April 20 Numaligarh Refinery Ltd's (NRL) plan to expand capacities has been hit due to the little headway made in availing of additional crude supplies.

The plan to expand the company's retail operations have also come a cropper due to heavy under-recovery in the past one year and non-availability of Central subsidy through oil bonds.

Encouraged by the Ministry of Petroleum and Natural Gas, NRL had drawn up a plan to expand the capacities from three million tonnes (mt) to 4.5 mt in late 2005-06.

A detailed feasibility report was also commissioned in 2006-07.

Having entered petroleum retailing with 35 outlets in 2005-06, NRL had also planned to dot the entire North-East and Eastern regions with well over 200 outlets last fiscal.

Though no proposal was submitted to Ministry concerned, the company had initiated informal discussions in merchant bankers' circles for a Rs 600-700 crore IPO for financing the projects.

However, as things stand now, NRL has no plan to expand capacities or float an IPO.

"The expansion proposal is virtually shelved and the IPO is nowhere in the agenda at this juncture," a BPCL official told Business Line. (BPCL holds controlling stake in the company.)

NRL is not alone in being hit by supply crunch. Refineries in the North-East as whole are constrained by lack of crude supply vis-à-vis Plan projections.

Though the Ministry attempted to solve the problem in June 2006, the two producers in the region - Oil India Ltd and ONGC - are not in a position to enhance supplies.

A plan for enhancing supplies through imports has not taken off either, since importing would be extremely costly due to locational disadvantage.

"Imported crude can only be implemented if refineries in the rest of the country share the additional costs," said an official of Bongaigaon Refinery and Petrochemicals Ltd (BRPL), which is the other major refinery in the region and is suffering from crude supply constraint.

Sources said that the proposal for cost-sharing was nipped in the bud.