State-controlled Hindustan Petroleum Corporation Ltd (HPCL) has proposed a Rs. 25,000-crore investment plan to relocate its 6.5 million tones per annum refinery in Mumbai with a grass root refinery at Ratnagiri in coastal Maharashtra that would be three times its size.
Government sources said the proposal to build an 18 to 20 mtpa refinery involves sale of land HPCL had acquired in Mumbai, which turned out to be insufficient for its ambitious expansion.
“We are evaluating the proposal,” HPCL’s chairman and managing director Arun Balakrishnan told the Hindustan Times, but refused to give further details.
A senior Petroleum Ministry official also confirmed the proposal, saying. “It looks feasible, considering the difficulties listed by the company.”
“However, we have asked HPCL to do a detailed techno-economical examination of the proposal. A final decision will be taken by the HPCL’s board,” the official added.
The new refinery will be funded partly through internal resources generation of about Rs 11,000 crore, while Rs 10000 crore will be raised from the sale of land of the existing Mumbai Refinery. Loans and external commercial borrowings (ECBs) will make up the rest.
HPCL currently has two refineries at Mumbai and Visakhapatnam with a combined refining capacity of 16 mtpa (million tonnes per annum) as against its sales volumes of around 25 mtpa. It is also setting up another nine mtpa refinery at Bathinda in Punjab with the L.N. Mittal group.
Company sources said it was vital to expand in order to meet rising demand.
HPCL officials said options including a careful expansion of Mumbai facilities were evaluated, but a plan relocate the Mumbai refinery was found to be the most feasible.
Another reason to relocate is the high incidence of octroi at 3 per cent on the crude inputs at the Mumbai refinery that runs up an annual bill of Rs. 630 crore.
The hefty bill has made HPCL wonder about the cost of its Mumbai operations.