The Hindu Business Line : House panel urges refineries to upgrade units

Self-sufficiency proposals
Refineries must develop ability to process more sour/heavy crude, thereby reducing their input cost.
They have been urged to upgrade distillation and processing units, which would reduce the output of low-value products and increase the output of high-value products.

New Delhi , May 21

Taking note of the growth registered by the refining sector in recent years, which has enabled the country to emerge as a net exporter of petroleum products, a Parliamentary panel has suggested that self-sufficiency in refining needs to be further augmented through upgradation of units that would increase the output of high-value products and reduce input costs.

The Standing Committee on Petroleum and Natural Gas has suggested that efforts should be made by the refineries to develop ability to process more sour/heavy crude, thereby reducing their input cost.

Over the next four to five years, with the completion of expansion projects of the existing units and setting up of new refineries at Bhatinda (Hindustan Petroleum Corporation), Paradeep (Indian Oil Corporation) and Bina (Bharat Petroleum Corporation), the country might emerge as a major regional export hub, it noted.

Viewing this trend of growth in the sector and expecting timely completion of these projects, the panel urged the refineries to upgrade distillation and processing units, which would reduce the output of low-value products and increase the output of high-value products. It asked the Government to implement these measures at the earliest.

Two mega projects

Expressing displeasure on the delay in completion of the two mega projects at the Panipat Refinery of Indian Oil Corporation, the panel said the responsibility for time and cost overruns should be fixed and suitable action taken against those held responsible.

The first mega project - an integrated paraxylene/purified terephthalic acid project was originally scheduled to be completed by March 2003. The completion schedule of this project was first revised to August 2005 and subsequently to April 2006. Similarly, in the case of the second mega project — Panipat Refinery Expansion — the completion was scheduled for May 2002, but was subsequently extended to July 2006. The panel said the initial approved cost of the first project was Rs 4,228 crore, which was later, revised to Rs 5,104 crore. Similarly, in the case of the second project, the initial approved cost of Rs 3,365 crore was subsequently revised to Rs 4,165 crore.

Now, there has been a further cost increase in the case of second project which has been stated to be within five per cent of the revised approved cost. The time overrun of these projects has been attributed to delay in engineering by project management consultants, and delay in delivery of equipment by some vendors/suppliers/contractors, the panel observed.

On the proposal to fix responsibility for the time and cost overruns, the panel was informed that penalty clause for price reduction has been applied as per contract against the project management consultants for delays on their part.