According to newspaper reports, the financial institutions have decided to set up a four-member committee of oil sector experts to examine the viability of Essar Oil's 10.5 MMTPA refinery. The decision was made even as ICICI Ltd., a large financial institution, decided to provide the company with additional funding of Rs 22 bn.
The refinery, expected to cost Rs 74 bn, is 67% complete. However, due to concerns pertaining to the cost structure of the refinery, the viability issues have resurfaced. Infact on comparison to the project cost of Reliance Petroleum some interesting facts come to light:
The difference in the cost structures is apparent and probably the reason behind the decision to set up a committee to look into the viability of the project. The surprising fact is that despite the inflated cost structure, ICICI has forwarded an additional Rs 22 bn loan to the project. One will have to wait and see what the committee has to say about the project.
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