Nagarjuna Oil Corporation Ltd, a subsidiary of Hyderabad-based Nagarjuna Fertilizers and Chemicals Ltd, is likely to complete its jinxed petroleum refinery at Cuddalore in Tamil Nadu by 2011-end.
The project, which was conceived in the late 90s, has been hanging fire due to a variety of reasons. “Civil work is on at the project. We hope to complete the construction and operationalise the refinery by November-December 2011,” Nagarjuna Fertilizers chairman and managing director KS Raju told DNA Money. The 6 million tonne capacity refinery has an outlay of Rs 5,000 crore.
“We have already achieved financial closure for the project. Of the total cost, equity is about Rs1,500 crore. Tatas have about 31% stake and we have about 51%. Remaining equity is held by various investors including the Tamil Nadu government,” he said. The company has tied up with a consortium of banks for debt.
Initially, Caltex was slated to be the partner in the refinery. However, with Caltex deciding to move out of India, the project did not move forward. Subsequently, various concessions and rebates given to the project by the Tamil Nadu government too expired, making it difficult for the group to execute the project. In fact, the state government gave about 1,600 acres to the company for setting up the project with a facility to expand the unit to 15 million tonnes over a period of time. “This time we don’t see any problems. The project is being executed as planned,” he said.
In addition, the group is also working on a plan to set up a chemical plant to manufacture chemical compounds useful in solar photovoltaic segment.
The unit would come up in Germany with an investment outlay of Rs150 crore. “It would take about 18 months to operationalise the unit. However, we are yet to decide on the financials of the unit including the equity and debt components,” Raju said. Nagarjua operates a 1.5 million tonnes urea unit at Kakinada in Andhra Pradesh. The unit is currently operating at over 100% capacity though the financials of the company have not been encouraging.
“The policy regime governing the fertiliser sector does not allow operational efficiencies. Unlike conventional system, if we increase our operational abilities in the unit, we will end up getting lesser profit. The unit will see better financials and innovative products once the government starts decontrolling the sector,” he said.
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