core sector communique

Revised cost estimates for the Assam Gas Cracker Project

The Cabinet Committee on Economic Affairs today approved the revised cost estimates of the Assam Gas Cracker Project to the tune of Rs. 8920 crore (on "as built basis") which would be funded by capital subsidy of Rs 4,690 crore and debt and equity for Rs 2961 crore and Rs 1269 crore respectively. Revised cost estimates (RCE) of Rs. 8920 crore is based on the following assumptions:

a) 10 percent IRR;

b) Debt-equity ratio-2.33:1;

c) polymer price - Rs. 67,709 / MT (weighted average);

d) price of natural gas - Rs.4,100 / TSCM;

e) price of naphtha - Rs. 35, 474 / TSCM;

f) pro rata infusion of equity and capital subsidy before drawdown of debt

In case the planned loans do not materialize, the same would be picked up as additional equity by the promoters. The revised capital subsidy will be sought by the Department of Chemicals and Petrochemicals from the Ministry of Finance / Planning Commission in 2011-12 and 2012-13 by way of additional budgetary support.

The project schedule has also been revised with mechanical completion by July, 2013 and commissioning by December, 2013.

The Assam Gas Cracker Project was initiated in pursuance of the Memorandum of Settlement signed between Central Government and All Assam Students Union (AASU) and All Assam Gana Parishad (AAGP) on 15th August 1985. Cabinet Committee on Economic Affairs (CCEA), in its meeting held on 18th April, 2006, approved the setting up of the Assam Gas Cracker Project at a project cost of Rs. 5460.61 Crores (fixed cost). However, owing to various reasons such as time escalation, sub optimal size of the plant, increase in infrastructural requirements & utilities and offsites resulting from detailed engineering and operational requirements, increase in construction cost, frequent bandhs, labour unrest, inadequate availability of skilled manpower at the site, prolonged monsoon etc., the project has witnessed time and cost overruns.

The Assam Gas Cracker Project is expected to give rise to a substantial employment generation, as a result of investments in downstream plastic processing industries and allied activities. The project is considered to be of crucial significance for the state of Assam and North-Eastern region. Presently, the project is in its fifth year of execution. Requisite land for the complex has been acquired and necessary land development is also in the completion stage.