The Rs 1,600-crore plant is proposed to be developed by MRL and a consortium comprising Larsen & Tourbo and the US-based PACG. As per the proposal, MRL will hold a 26 per cent stake in the venture, while another 26 per cent will be equally shared by L&T and PACG.

The Tamilnadu Industrial Development Corporation (TIDCO) also intends to pick up around 11 per cent equity in the project. Part of the equity can be subscribed by the contractors undertaking equipment, procurement and construction (EPC) and operation and maintenance works, said the sources. The balance will be offered to financial institutions, they said.

Though, the fate of the project is now linked with the disinvestment plan of MRL, current promoters are hopeful that the new partner will also favour its implementation.

This isbecause the project is based on the refinery residue which is a waste product for a refinery. Besides, when used in a power plant it reduces the variable cost of generation which in turn brings down the power tariff, said industry experts. Because, with a power plant located close to the refinery fuel transportation costs also comes down.

On the other hand, disposal of refinery residue which has a high sulphur content is difficult, specially under the present stringent environment protection norms.

Thus, setting up a power plant is beneficial for an oil company because it not only resolves the problem of residue disposal but also provides additional revenue.

Under this scenario, promoters expect that whoever buys the equity in the refinery would like to set up the plant. However, this may change the equity pattern of the power venture, said sources.

The pre-feasibility report prepared by EIL earlier, has also recommended the implementation of the project. The company has suggested that the use ofintegrated gasified combined cycle (IGCC) technology for the plant. Detailed technology analysis is being carried out as part of the DPR.

The developers are also in talks with the state electricity board to ensure the payment.

INSIGHT
Project makes sense

Whoever takes over Madras Refinery, it makes lot of sense to go ahead with the power project. The power plant will be able to take care of the problem of disposing off high sulphur residue, though it will have to tackle it in the off-gas which is comparatively simpler. Apart from having a captive source of fuel, the power plant will be in a position to offer low cost power. Though the government has talked about clearing power projects, not much has been done on this front.

Shishir Asthana