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Chennai , Sept. 25

INDIAN Oil Corporation hopes to complete the 670-km long Chennai-Tiruchi-Madurai product pipeline in 18 months.

"The clock has started ticking. It is a tall order," Mr M.S. Ramachandran, Chairman, IOC, told newspersons here. The IOC board recently approved the proposal to execute the project on its own at a cost of Rs 381 crore.

Earlier, addressing shareholders of Chennai Petroleum Corporation Ltd (CPCL) at the annual general meeting, which is 51 per cent owned by IOC, Mr Ramachandran, who is the Chairman of CPCL, said that this pipeline would be crucial for evacuating petroleum products to the southern parts of Tamil Nadu.

"This project will have a long-term beneficial impact on the profitability of your company," he said.

Asked about IOC's proposal for a stock swap with the National Iranian Oil Company (NIOC), which holds a 15.38 per cent stake in CPCL, Mr Ramachandran said the NIOC had not yet taken a decision on this proposal. He would discuss this with senior NIOC officials who are slated to visit Delhi shortly. (IOC had proposed that NIOC sell its stake in CPCL to IOC, in lieu of which the Iranian company would get a stake in IOC. Apart from two representatives on the CPCL board and a dividend income, NIOC does not get anything else from its stake in CPCL. As an investment, it will be better for the Iranian company to get a stake in IOC, was IOC's reasoning for this move.)

He told the shareholders that during July last, NIOC transferred its shareholding in CPCL to Naftiran Intertrade Company Ltd, which was one of the wholly owned affiliates of NIOC. To a question, Mr S.V. Narasimhan, Managing Director, CPCL, said that the company's debt equity ratio now stood at 1.53 and with the Rs 850-crore capital expenditure planned for this year, the ratio was expected to go up to 1.8 or 1.9. However, with capital expenditure tapering off in the next two years, the debt equity ratio would come down to 1.1 or 1.2, he said.

Asked about the proposed 500 MW power project using refinery residue as fuel, Mr Narasimhan said that it would be executed as a joint venture with the Neyveli Lignite Corporation. CPCL would hold a 26 per cent stake in the joint venture. Technology would be sourced either from Shell or Texaco, through a competitive bidding process. Mr Ramachandran told the shareholders that CPCL, through good treasury management, had brought down its cost of funds from 12 per cent to 7 per cent.

He said that CPCL would lay a new crude oil pipeline from the Chennai port to the Manali refinery along the route of the proposed port connectivity project. On the domestic demand for petroleum products, Mr Ramachandran said that up to August this financial year, the growth was negative. However, there were strong signs of revival.

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