In­dian oil lines up `1.8l-crore Cap­i­tal ex­pen­di­ture for 5 years

Resource Digest - - RESOURCE DIGEST -

In­dia’s largest re­fin­ing and oil mar­ket­ing com­pany In­dian Oil Cor­po­ra­tion (IOC) has lined up cap­i­tal ex­pen­di­ture to the tune of R1.83 lakh crore be­tween FY18 and FY22. A large chunk of the pro­posed in­vest­ment would go to­wards ex­pan­sion of re­finer­ies and mar­ket­ing-re­lated fa­cil­i­ties such as set­ting up of ter­mi­nals, the PSU told an­a­lysts in a re­cent con­fer­ence call.

In the cur­rent fi­nan­cial year, IOC is spend­ing R19,000crore. In the next five years, R50,000 crore would be spent to­wards ramp­ing up re­fin­ing ca­pac­ity, while an­other R40,000 crore would be spent un­der mar­ket­ing ini­tia­tives, said an an­a­lyst present at the con­fer­ence.

An­other R22,000 crore is ear­marked for pipe­lines ex­pan­sion, R30,000 crore for ex­plo­ration and pro­duc­tion and R29,000 crore for petro­chem­i­cals busi­ness.

Cur­rently, IOC is in the process of mak­ing a 15 mil­lion tonnes per an­num green­field re­fin­ery at Paradip in Odisha op­er­a­tional. “De­spite all the ini­tial glitches, the Paradip re­fin­ery has fi­nally been com­mis­sioned. The sec­ond quar­ter FY17 vol­ume stands at 1.7 mil­lion tonnes and cur­rent util­i­sa­tion is at 65%. By March 2017, quar­terly run rate of of the re­fin­ery would be 3.7 to 4 mil­lion tonnes. Post 90% util­i­sa­tion level, it would start mak­ing pos­i­tive gross re­fin­ing mar­gin,” Dhaval Joshi, re­search an­a­lyst at Emkay Global Fi­nan­cial Ser­vices said in a note.

IOC ag­gres­sive ex­pan­sion strat­egy comes at a time when In­dia is rac­ing to add ca­pac­ity to meet in­creas­ing fuel con­sump­tion. In­dia is poised to sur­pass Ja­pan as the world’s third-largest oil user this year and will be the fastest-grow­ing crude con­sumer in the world through 2040, Bloomberg quoted Paris-based In­ter­na­tional En­ergy Agency say­ing.

With the gov­ern­ment free­ing petrol and diesel prices cou­pled with di­rect sub­sidy trans­fer for do­mes­tic cook­ing gas, IOC has more leg room for in­vest­ments. Ear­lier, due to de­layed com­pen­sa­tion of sub­si­dies, the com­pany’s debt piled up leav­ing lit­tle room for in­vest­ing in new projects.

IOC’S gross debt has come down by nearly 21%to R41,885crore as of Septem­ber 30, against R53,404 crore on March 30, said A K Sharma, di­rec­tor (fi­nance) of the gov­ern­men­towned firm. IOC con­trols 11 of In­dia’s 23 re­finer­ies. The group re­fin­ing ca­pac­ity is 80.7 mil­lion tonnes per an­num — the largest share among re­fin­ing com­pa­nies in In­dia. It ac­counts for 35% share of coun­try’s re­fin­ing ca­pac­ity.

IEA es­ti­mates sees In­dia’s fuel de­mand to touch 329 mil­lion tonnes by 2030. Cur­rently, In­dia’s to­tal re­fin­ing ca­pac­ity stands at 230 mil­lion tonnes a year. The to­tal fuel de­mand in FY16 was 183.5 mil­lion tonnes, ac­cord­ing to the petroleum min­istry.

In or­der to meet the de­mand, the Prime Min­is­ter Naren­dramodi gov­ern­ment has pro­posed a mega 60 mil­lion tonnes a year re­fin­ery in Rat­na­giri district of Ma­ha­rash­tra. The project is to be setup by IOC in joint ven­ture with other pub­lic sec­tor firms.

AN­OTHER R22,000 CRORE IS EAR­MARKED FOR PIPE­LINES EX­PAN­SION, R30,000 CRORE FOR EX­PLO­RATION AND PRO­DUC­TION AND R29,000 CRORE FOR PETRO­CHEM­I­CALS BUSI­NESS

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