The Indian Oil Corporation has postponed the setting up of the 9 million tonne Paradip refinery to the XIth Five Year Plan period as its commissioning earlier than that will end in a glut of products, forcing other refineries to export or run below the optimal capacity.

"The Paradip refinery was initially planned for commissioning by the end of 2003 but was deferred by a year following the delayed grant of tax concessions by the Orissa government. Flat growth in petroleum product demand led to the deferment of the project to 2007-08, and now after reworking the cost it may only be viable to set up the refinery in 2010," the company sources said in New Delhi on Monday.

The country at present is surplus in refining capacity. Against the demand of 103 million tonnes, India has a refining capacity of 117 million tonnes. IOC has already scaled down the demand projection in the terminal year of 10th Five Year Plan (2006-07) to 111 million tonnes from the earlier projected 124 million tonnes.

A feasibility study prepared by the IOC for the prime minister's office states that the commissioning of the refinery earlier than the 10th Five Year Plan would force its Barauni refinery to scale down output to sub economical levels while Koyali, Chennai and Haldia refinery would have to export products, they said.

Besides, the refinery project was economically unviable even if the Orissa government extended the sales tax exemption, sources said but reiterated the IOC's commitment to complete the refinery project in phases.

About Rs 150 crore (Rs 1.50 billion) has been invested in land acquisition and preliminary civil work.