Following PMO intervention, Assam gas cracker unit back on course

19-Sep-05

Following the PMO's intervention, the Assam gas cracker seems to be back on course. The finance ministry has been asked to take a fresh look at the proposal for the Assam gas-cracker project. The Rs 5285-crore Assam gas-cracker project proposal had run into rough weather in May 2005, when the finance ministry had withheld approval on the ground that it was not viable. According to the ministry, the Rs 1983-crore capital subsidy required for the project may not be justified as the cracker has a low employment potential. However, due to the backing of the Planning Commission and the PMO's intervention, the proposal seems back on track, as the public investment board plans to consider the proposal next week. The plan has been prepared with a new set of assumptions, including waiving of excise duties and sales tax and supplying natural gas as feedstock at regulated Northeast prices, he added. The gas will be drawn from the ONGC and OIL fields in the region. The government is of the opinion that the free-trade agreement to be signed with Asean will impact the commercial viability of the project. Hence a financial analysis on the possibility of increased foreign competition due to the scaling down of import duties has been sought. GAIL has been asked to look into the feasibility of the project at a lower internal rate of return of 8% instead of 12%, as this would lower the amount of capital subsidy required for it.