Feasibility study of Gail Assam cracker project approved

15-Feb-05

With the Congress government in power once again at the Centre, the prospects of the Assam gas cracker project being implemented have brightened. The Assam gas cracker project was initially planned as part of the political package for the state of Assam under the Rajiv Gandhi accord. However, the plans came to a standstill when Reliance Industries backed out of the project. The petroleum ministry and the department of petrochemicals have both approved feasibility studies along with the subsidy required for the project. With this approval, Gail (India) Ltd is optimistic about the Rs 4,000-crore Assam gas cracker project coming through. The next step is to place the same before the cabinet after obtaining the approval from the public sector investment board. Subsidies of Rs 2,000 to 3,000 crore will be granted depending on the price at which the feedstock that will be made available for the cracker. Various fiscal concessions such as excise tax exemption and customs concessions for the import of equipment will have to be provided for the project. Price of natural gas from the Oil India Ltd and ONGC fields for Assam is fixed at 60% of the price for the rest of the country, it is still too high for the cracker to be viable. Gail has worked out a draft feasibility report envisaging both naphtha and natural gas as feedstock to make the project viable. Under this proposal, NRL and OIL will get a 10% stake. While ideal capacity for a petrochemicals unit is between 0.6 to 1 million tpa, the limited availability of feedstock in the region has restricted the size of the Assam gas cracker to 0.21 million tons. This sub-optimal size of the plant could pose problems of the economies of scale. The cracker is expected to be dual mode so that naphtha can be used as a feedstock as well. Gail plans to import a new technology to make petrochemicals from the methane content of natural gas as well. Numaligarh Refineries Ltd (NRL) and Indian Oil Corporation’s refineries in the Northeast have expressed that they will not supply the naphtha at a concessional price, hence the government has decided to pick up this subsidy bill.