This follows a decision by Nagarjuna Fertiliser and Chemicals Ltd. (NFCL), which took over the project from the Hyderabad based Pennar group, to convert it from a 100 per cent EOU to sell the entire output in the domestic market following change in government policy.

However, till such time that the government decides to let the private sector enter petroleum marketing, NFCL will push its products through one of the PSU oil companies, sources said.

While Nagarjuna holds a majority 51 per cent of the equity in the Cuddalore refinery project, forking out Rs 550 crore, TIDCO holds 11 per cent. However, we have left a window open for a minimum of 26 per cent equity in the project to be picked up by Caltex which has replaced Mobil Corporation,the sources said. The remaining portion of the equity is to be taken up by foreign financial insitutions which have evinced keen interest in the project. Dismantling of the five million tonne per annum plant which has been acquired from Mobil Germany is to begin later this month for transportation to Cuddalore from Frankfurt for installation which is scheduled to take three years starting January 1999.

Nagarjuna has been able to begin work on the project even without a financial closure because the financiers have reposed confidence in the project which is being taken up on a 2:1 debt-equity ratio, the sources said. Nearly Rs 800 crore of the Rs 2200 crore debt is coming from the German KFW which will finance the cost of the plant. The remaining portion of the debt is from the Indian financial institutions with the IDBI taking up a major portion of it. Originally conceived as a three million tonne per annum project by the Pennar group, the capacity was however increased to five million tonnes on the adviceof consultants Raytheon keeping scale economies in view.

However, considering the increase in capacity also called for a hike in the project cost from the original Rs 900 crore Pennar's Nruprender Rao roped in old friend K S Raju of Nagarjuna and the two swapped projects with the former taking over the latter's steel oeprations and the refinery going to the Nagarjuna group. While Mobil was orginally supposed to have partnered in the venture promoters reportedly fell out with it on the question of majority equity issue paving the way for Caltex.