Blow to Baalu as BPCL defers nod for TN petro-chem complex

NEW DELHI, May 12: Petroleum Minister T R Baalu's attempt to help his home state suffered yet another blow on Saturday when the board of Bh...

NEW DELHI, May 12: Petroleum Minister T R Baalu’s attempt to help his home state suffered yet another blow on Saturday when the board of Bharat Petroleum Corporation (BPCL) deferred approval on the proposed petrochemicals complex at Krishnapattnam in Tamil Nadu.

The board refused to sanction Rs 50 crore (including foreign exchange component of Rs 6 crore) for the preparation of a detailed feasibility report since the proposal did not establish the project’s viability. The board has directed that the proposal be re-examined and specific details on its profitability be put up for reconsideration.

The BPCL proposal is the second of such projects for Tamil Nadu which have been put on hold due to uncertainty over their profitability. The Indian Oil Corporation proposal for an export-oriented refinery in Nagapattinam was also deferred by the IOC board since the proposal lacked firm identification of overseas markets and the project’s profitability.

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(Moreover, an expert panel Sub-Group on Refining had recommended against setting up of EOU refineries due to quality competitiveness in the neighbouring countries coupled with locational disadvantage).

BPCL’s proposal for setting up a composite naphtha cracker complex has been staved off since the domestic petrochemicals sector is reeling under a recessionary phase due to a lowering of duties on imports. Moreover, contrary to the D V Kapoor Committee’s projections of a deficit in petrochemicals sector by the turn of the century, present indications are that there would be a glut in the domestic market on account of cracker complexes on the anvil.

Though the proposal-based on Tata Strategic Management’s study – suggests an internal rate of return of 26.68 %, the board was skeptical of the projections since it does not embody the proposed expansions/new projects or the proposed reduction in import duties to Asian levels by the year 2000. Reduction of import duty would make imports cheaper, thereby curtailing demand for domestic output.