Work on the project has been at a standstill for the past six to seven months owing to paucity of funds. Highly placed institutional sources said that ABB recently wrote to the financial institutions indicating its willingness to put up Rs 610 crore for the project, which may be considered as "a bridge against equity subject to the approval of ABB's executive committee".

This means that ABB would have the option of picking up equity in the project once completed if Essar Oil is by that time unable to finalise a strategic tieup with Bharat Petroleum Corporation (BPCL) and Oman Oil Company for picking up a stake in the project.

ABB has also assured the institutions that it would be agreeable to entering into a management contract with Essar Oil, and would take fullresponsibility for the administration and completion of the project. On their part, the institutions have sought a bank guarantee or other support from Essar Projects to ensure its performance against the contracts awarded.

The ABB offer, the sources say, will ensure that Essar Oil would be in a position to complete its equity tieup without seeking any assistance from the institutions for bridge equity, or awaiting participation in the project from strategic investors. It would also enable the institutions to tie up the remaining debt, thereby facilitating achieving financial closure.

Essar Oil has proposed to finance the ambitious project with Rs 2,150-crore of equity and Rs 4,850-crore debt. The project is expected to go on stream in the first quarter of 2001.

The institutions had given assistance to Madras Refineries and Petrochemicals Ltd and to Haldia Petrochemicals in similar circumstances by tying up an equity of Rs 671 crore and bridge equity of Rs 400 crore.

According to a recent evaluationof Vadinar conducted by ABB Lummus, the international project consultant and EPC contractor, the project is 70 per cent complete. The sources said that at a recent heads of institutions meeting (HIM) held on August 19 to review the project's progress, the institutions had considered the revised project cost of about Rs 7,000 crore (excluding a countervailing duty of Rs 400 crore), against the earlier cost estimate of Rs 6,725 crore in view of the losses suffered by the refinery project during last year's cyclone.

The countervailing duty is modvatable in one year from the date of commencement of commercial production.

The sources said that Essar Oil's insurance claims were under finalisation for the estimated Rs 500-crore losses suffered during the cyclone. With the company availing itself of the claims, it is expected that there will be no further rise in the project cost.

The company has initiated a marketing agreement with the public-sector Indian Oil Corporation (IOC), according to which, 50 per centof the offtake from the refinery would be through IOC, and the balance through BPCL.

According to an assessment of the progress made on the project, Essar Oil has received $430-million worth of equipment at the refinery site, which includes a crude distillation unit, vacuum distillation unit, and other critical equipment.

The majority of the engineering deliverables are also on site, while another $200-million worth of equipment is lying ready with vendors for shipment.

Once completed, the refinery would have a product mix of middle distillates, including superior kerosene oil and high-speed diesel, which constitute almost 60 per cent of the country's demand. It would also manufacture liquefied petroleum gas, lead-free motor gasoline of various octane levels as well as high-octane, lead-free motor gasoline, and reformats for the export markets.