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OIL spurns Bongaigaon buyout offer

Pradeep Puri in New Delhi

Oil India Ltd has turned down Indian Oil Corporation's proposal to take over its 2.35 million tonne per annum Bongaigaon Refinery and Petrochemicals Limited.

OIL has said that this is not an economically viable proposition as it is only a 3 million tonne per annum crude oil production company and could not be saddled with a refining capacity of around 6 million tonne per annum in case it goes in for the acquisition of the 3 million tonne per annum Numaligarh Refinery Limited as well.

Moreover, OIL has written to the petroleum ministry that in any case, it would not like to take over the loss-making petrochemical and polyester staple fibre units along with the refinery.

OIL has already conveyed its consent to the petroleum ministry for increasing its stake in NRL from 10 to 51 per cent by acquiring a part of the stake in the refinery held by Bharat Petroleum Corporation Ltd at face value.

However, OIL has suggested that it may consider acquisition of BRPL at face value in case IOC, which holds 74 per cent in BRPL, provided the Assam Oil Division marketing wing of IOC was also vested with OIL at book value.

Industry sources say that this proposal is not acceptable to IOC. BRPL has a paid-up capital of Rs 199.82 crore (Rs 2 billion). It was incorporated in 1974. The long-term viability of the company is critically dependent on crude supply and development of marketing capabilities. It receives crude produced in Assam, which is inadequate to meet the full requirement of the refineries in north-east.

BRPL also suffers inherently from marketing disadvantage as it is located far away from the main market for both petroleum and petrochemical products.

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