Pipeline trouble for IOC at new Paradip refinery

Dec 17 2013, 05:09 IST
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SummaryIndian Oil Corporation’s Rs 30,000-crore Paradip refinery will be deprived of a pipeline to transport products

Indian Oil Corporation’s Rs 30,000-crore Paradip refinery will be deprived of a pipeline to transport products to consumers in eastern parts of the country for well over a year after its scheduled commissioning in March 2014, jacking up its costs and hitting its already strained finances.

A frustrating four-year delay in securing the forest clearance for the 1,100-km pipeline has now necessitated the issue of fresh tenders for laying long segments of the pipeline. Until this crucial infrastructure is in place, the state-run company will have to rely on the more expensive railway network and roads to transport fuels from the sophisticated refinery to consumers and sales outlets.

Compared to the operating costs of using one’s own pipeline, the rail tariffs would be at least 3-4 times more expensive, said company sources. The railway freight rates for diesel stands at R1041.80 per ton for an average lead distance of 645 km.

According to sources, IOC will also have to incur cost escalations above the earlier estimated R1,800 crore investments on account of re-tendering as contractors are facing a cash squeeze due to project delays. The PSU posted a steep 82.5% annual drop in net profit for the July-September quarter to R1,684 crore following forex losses and receipt of incomplete compensation from government for under-recoveries on sale of subsidised petroleum products.

The proposed Paradip-Ranchi-Raipur pipeline, which was earlier expected to be ready by September 2012, is designed to extend across the states of Orissa, Chhattisgarh and Jharkhand and transport petroleum products such as LPG, naphtha, petrol kerosene and diesel in the eastern parts of the country.

The Paradip to Raipur pipeline was authorised by the Petroleum & Natural Gas Regulatory Board in 2009 and was expected to be completed by September 2012. Around 300 km of the pipeline stretching across Chhattisgarh is almost complete, but only small portions of the 650 km in Orissa and 100 km in Jharkhand have seen the light of day so far. “We received forest clearances for Orissa only in September 2013 and Jharkhand in October 2013. Our contractors are also facing resistance from farmers in these two states,” said an IOC official.

IOC officials hope the pipeline would be completed by the end of 2015, but this is subject to no further hurdles escalating in the area. The pipeline will originate from the Paradip refinery in Orissa and pass through Jatni, New Sambalpur and Jharsuguda in

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