ONGC may buy out Gail India stake in OPaL
State-owned Oil and Natural Gas Corp (ONGC) may buy out gas utility Gail India in its Dahej mega petrochemical project in Gujarat to take full control of the recently commissioned plant.
Gail had in 2008 picked up a 19 per cent stake in ONGC Petro-additions (OPaL), which was then building the mega petrochemical complex at Dahej in Gujarat. But the project, which started in 2006, faced major cost and time overruns, which forced Gail to restrict its equity contribution to the original Rs 996.28 crore. This investment in the expanded project cost meant that the gas utility’s stake dropped first to 17 per cent, then to 15.5 per cent and now about 9 per cent, sources said.
“It doesn’t make any business sense to hold such a small percentage stake and it is best that ONGC buys out Gail in the project,” they said.
The 1.1 million tonnes plant, which at the time of conception was projected to cost Rs 12,440 crore, got completed only last year for about Rs 30,000 crore.
After Gail in 2008 agreed to pick up a 19 per cent stake in OPaL, the project cost was in 2010 was revised to Rs 19,535 crore. It was couple of years later further revised upwards to Rs 21,396 crore with December 2013 set as the commissioning date.
When project cost was revised to Rs 19,535 crore, Gail decided to restrict its participation to 17 per cent. This was done because the firm’s board had powers to approve an investment of only up to Rs 1,000 crore.
Consequently, it decided to make an equity contribution of Rs 996.28 crore towards the 17 per cent stake, they said. But when the project cost went up further to Rs 21,396 crore, the promoter’s equity contribution increased from Rs 5,860.5 crore to Rs 6,418.8 crore at 70:30 debt-equity ratio. Gail is not inclined to make any additional equity contribution and has decided to cap its investment in OPaL at the capital it has already approved Rs 996.28 crore.