Assam gas cracker project suffers cost, time overruns

G. Srinivasan New Delhi | Updated on May 29, 2011

The Assam gas cracker project, being implemented by the Brahmaputra Cracker and Polymers Ltd (BCPL), was approved in 2006 at a cost Rs 5,460 crore to set up a 280,000 tonnes per annum petrochemical plant. The commissioning of the project has been pushed to December 2013 and the cost has escalated to Rs 9,285 crore.

Government sources told Business Line here that originally conceived as part of the Assam Accord in 1985 by Rajiv Gandhi, the actual approval took place only in April 2006 as a joint venture of GAIL (India) Ltd, OIL, NRL and the Assam Government as a central public undertaking (CPU).

The Prime Minister, Dr Manmohan Singh, had sought project completion by 2012.

In a recent communication to the Prime Minister the Minister of Chemicals and Fertilisers, Mr M.K. Alagiri, has reportedly stated that in view of “the significant” spurt in the project cost, thorough scanning of the project was inevitable, the sources said.

Accordingly, an independent Committee of Experts was set up to weigh the reasonability of the proposed revised cost and revised schedule based on a Engineers India Ltd (EIL) report and suggest options to improve the financial viability of the project as also lay out measures for early completion of the project. The Expert Committee gave its report in the third week of April.

Meanwhile, the Department of Chemicals and Petrochemicals has also set up a Standing Committee which said the seed for time and cost overruns was inbuilt in the very way the project was formulated.

It further noted, the sources said, that the time and cost overruns were ‘inevitable', given the fact that the detailed financial report (DFR) failed to address comprehensively the fundamental limitations under which the project was supposed to function, besides failing to envisage ‘adequate incentive structure for the promoters/owners'. The report of the Standing Committee has been sent to line ministries including Petroleum & Natural Gas, besides to GAIL, BCPL and EIL for follow-up action.

The sources said that based on all these inputs, the Department has also fashioned the draft Public Investment Board (PIB) memorandum as part of the pre-PIB phase which would be sent to the Department of Expenditure for PIB approval.

Mr. Alagiri informed the Prime Minister, the sources said, that the aggregate cumulative expenditure on the project up to end-March 2011 is Rs 2,083 crore with the physical progress being close to 38 per cent. He also apprised Dr Singh of the physical and financial progress of the project that is being periodically ‘reviewed by the Monitoring Committee under the Chairmanship of Secretary, Department of Chemicals & Petrochemicals”.


Published on May 29, 2011

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