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Cost benefit analysis

The financial gain on account of the proposed strategic initiative of having captive Port

facilities at different Ports including Bunkering facilities would be difficult to assess dueto lack of complete information and data. However to assess the impact of the

proposed strategic initiative on a directional basis, the financial benefit to the

Corporation on an order of magnitude basis has been analyzed for a typical Grass Root

Refinery Case with reference to the proposed West Coast Refinery.

The impact in financial terms for the same along with the assumptions made is

summarized below. The workings are provided as Annexure A

Grass Root Refinery Proposed West Coast

The estimated cost of setting up the Captive Port facilities on an order of magnitudebasis has been derived from the capital cost of a similar venture by Ennore Port Ltd

which was set up in 2006. As there are no direct incomes generated by these facilities,

for the purpose of evaluating the investment, the charges presently being paid to the

Port and other agencies directly and indirectly has been considered as savings in case

of Captive Port facilities. Further, owning the jetties will also reduce the turnaround time

of each vessel which has also been translated in financial terms to indicate further

savings. However, a certain percentage out of the savings thus derived has been

considered as revenues to be shared with the Port authorities and has been treated as

cost to IOCL. Repairs and maintenance costs for the Port facilities have also been

considered in the lines of Ennore Port Limited.

On an average, the total savings as described above on account of this initiative in

terms of absolute value to the Corporation after deducting the operating expenses but

before tax outgo would be to the tune of Rs. 223 crores per annum. Translating the

same on a per barrel basis the savings would approximately amount to Rs 17.20 per

barrel of crude processed equivalent to USD 0.31 per barrel. To arrive at the above

results the following assumptions have been made.

(a) Initial Refinery capacity 15 million metric tons per annum with an increase in

capacity by another 5 million tones after 7 years of operation.(b) 50% of the products have been considered for exports as well as coastal

movement.

(c) All crude will be imported and 75% will be through Very Large Crude Carriers

(VLCC) and balance will be through normal ships.

(d) The estimated cost of the Port Facilities would be around Rs. 700 crore and the

period of construction is considered as 36 months.

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(e) The expenses related to Port Charges, Pilotage, Wharfage, Tug Hire and

Berthing/Mooring charges are based on the actual outgo presently at Vadinar

and Paradip.

(f) The turnaround days for each ship/VLCC are also based on the average

turnaround presently encountered at Vadinar and Paradip. For the purpose of

calculating the savings the turnaround time has been reduced with a view that

the operations would be optimal and faster because the facilities are for captive

use. However, savings on account of faster turnaround has been considered vis-

-vis the existing operations.

(g) A 5% revenue sharing with the State authority has been considered based on the

lines of Gujarat Maritime Board.