After UK based Hinduja group, Reliance Industries (RIL) and Essar Oil have evinced interest in Oil and Natural Gas Corporation's (ONGC) proposed Rs 26,500-crore refinery at Kakinada, Andhra Pradesh. RIL and Essar are evaluating stake purchase in the Kakinada refinery. This interest is being maintained by the two Indian oil majors despite ONGC maintaining its stand that the refinery is not financially feasible if the Andhra Pradesh government fails to offer added incentives. ONGC's subsidiary Mangalore Refinery and Petrochemicals (MRPL) holds 26% stake in KRPL, IL&FS holds 51% and the balance stake is held by the Andhra Pradesh government. The 15 mln tpa refinery will be implemented by Kakinada Refinery and Petrochemicals (KRPL).
ONGC is seeking exemption from sales tax on the sale of petroleum and petrochemical products, free power and water supply during the construction phase, and road and rail connectivity. ONGC claims that the rate of return on investment estimated at 10.27% at a capacity of 15 mtpa, would turn negative in case of a 10% rise in the capital cost.