Rs 4,000 cr cost overrun on Assam cracker plant

Government panel says faulty feasibility report delayed project
Faulty feasibility report has delayed Assam Gas Cracker Project (AGCP) by over 15 months, which may cost an additional Rs 4,000 crore. This was said by a standing committee constituted for fixing the responsibility for time and cost over run of the project.

The PM had unveiled the gas cracker project in Lepetakata in Dibrugarh in April 2007, which was expected to complete in five years. However, the project deadline has been extended to December 2013 with a revised cost of Rs 9,285.04 crore.

The revised estimates are yet to be sent to public investment board (PIB) before seeking approval of cabinet committee on economic affairs (CCEA). Brahmaputra Cracker & Polymer (BCPL) has undertaken the Lepetakata project. BCPL is a joint venture between GAIL (India), Oil India, Numaligarh Refinery and Assam government.

Last week, chemicals and fertiliser minister MK Alagiri apprised prime minister of the delay in commission of the project. “The report in a nutshell has brought out that the seed for time and cost over runs was embedded in the very way the entire project was formulated,” Alagiri said in a letter to Singh dated May 25.

“Considering that the detailed feasibility report did not attempt to address the basic limitations under which the project was supposed to function and did not envisage adequate incentive structure for the promoters, the time and cost over runs were inevitable,” Alagiri said.

Oil India chairman NM Borah and EIL chairman AK Purwaha were not available for comments. Gail is the majority stakeholder of BCPL with 70 per cent stake. Oil India, Numaligarh Refinery and Assam government each hold 10 per cent.

The department of chemicals would be sending the revised estimate report to department of expenditure shortly before placing it before PIB and then taking the project for CCEA approval.

Gail told Financial Chronicle that the project DFR was prepared in 2005.

"Due to various reasons, the actual project implementation could start only in 2009. Thus, the main reason for increase in project cost can be attributed to the change in the cost indices compared with 2005. We would like to highlight the fact that the North East region has a relatively longer Monsoon period, and there is limited time available for the construction activities of the project," Gail said in an email response to FC's queries.