The Hinduja group plans to go ahead and set up a Rs 25,600 crore (Rs 256 billion) refinery at Kakinada even if its indecisive project partner Oil and Natural Gas Corporation opts out.
"We have given in writing to the Andhra Pradesh chief minister that we are keen to set up the project, with or without ONGC," Hinduja Group Chairman G P Hinduja told PTI in New Delhi.
ONGC had put a slew of conditions, including Andhra Pradesh government giving 950 acres of land free of cost, sales tax exemption and fiscal concessions equivalent to a Special Economic Zone, for setting up the 15 million tons refinery-cum-petrochemical project at Kakinada.
The concessions would cost the state government about Rs 16,000 crore (Rs 160 billion). Even if ONGC were to join the project, the London-based Hinduja group is keen to take a majority stake, he said.
However, Hinduja was optimistic about the economic feasibility of the project and said the Group has also informed the state government of the source of crude oil for the refinery.
After the exit of Subir Raha, who had drawn a blueprint to catapult ONGC to become the second largest refiner in the country, ONGC has fettered away the downstream expansion plans and the new management has taken a dim view of the Kakinada project.
It also wants the state to give free power and water to the project, provide road and rail connectivity, develop sewage and refinery effluent disposal system and give communications connectivity to enhance the 10.27 per cent return on capital currently.
After his exit from ONGC, Raha joined Hindujas and soon after the automobile-to-banking group evinced interest in picking a majority stake in the Kakinada refinery project.
Industry sources said ONGC has made it clear that it would proceed with the project only after getting a confirmation from the state government for the incentives it had sought.
Originally, a 7.5 million tons refinery was envisaged at Kakinada. But Engineers India Ltd did not find the size techno-economically feasible and so the capacity was doubled.
The estimated cost of setting up the 15 million tons refinery with high complexity configuration stood at Rs 25,000 crore (Rs 250 billion). Besides, Rs 600 crore (Rs 6 billion) would be needed to build a single-point mooring and the sub-sea pipeline for transportation of crude oil to the project site. The project is to have debt-equity ratio of 2:1 (Rs 17,000 crore debt).
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