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Essar offers to take over Central India Pipeline

Arijit De, Hemangi Balse in Mumbai | August 16, 2003 09:28 IST

Essar Oil has offered to take over the Rs 1,600 crore (Rs 16 billion) Central India Pipeline project from Petronet India.

It has offered to buy Petronet's equity of Rs 400 crore (Rs 4 billion), and is in discussions with multinational companies to offer them strategic stakes.

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Essar Oil executives told Business Standard, "Once the (Essar) refinery is on stream, we will require a pipeline -- the cheapest mode of transport -- to take our products from Vadinar to the central parts of the country."

"We had earlier proposed to underwrite the project. However, the project is being shelved by its promoter (Petronet India) and so we have offered to take it over. We are awaiting a formal clearance by the Petronet India board," an Essar Oil executive said.

"The project, which will have a debt-equity ratio of 3, will be synchronised with the Essar Oil refinery project. The project is excellent and will reach high-demand areas across the country," he added.

The 1,760 km pipeline will go from Jamnagar to Ratlam via Rajkot and Koyali. It will also have two offshoots: a line from Ratlam will connect Gwalior while another line will feed Nagpur.

The project ran aground over conditions loaded by the sole bidder, a consortium led by the Russian firm OAO Stroytransgaz.

It bid in response to Petronet's global tender to lay the pipeline on a build-own-operate-transfer basis.

The Russian company's rider was that the petroleum ministry should give an assurance that no other pipeline would be allowed on the same route.

It also wanted the users of the pipeline to commit themselves to a take-or-pay agreement.

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