labels: madras refineries
MRL's profits down, but expansion plans to stay on coursenews
Venkatachari Jagannathan
03 April 2000
Despite an increase of Rs 1,786 crore (provisional) in turnover, the Chennai-based Madras Refineries Ltd (MRL) -- to be known as Chennai Petroleum Corporation Ltd from April 6 onwards -- has registered a drastic reduction in its profit after tax for the year 1999-2000.

The company, on a turnover of Rs 5,533 crore (provisional) has clocked a net profit of Rs 140 crore (provisional), as against Rs 205 crore booked last fiscal. The provisional profit before tax stands at Rs 190 crore as compared to Rs 276 crore clocked the previous year.

" The fall in profits is not due to the dismantling of administered pricing mechanism (APM), but due to increase in international crude prices," explains S. Rammohan, chairman & managing director. While the crude prices went up by 58 per cent last year, the company was able to pass only 44 per cent on to the consumer. During the year under review, MRL commissioned its Rs 550 crore diesel hydro desulpharisation (DHDS) plant as the Supreme Court ruled to the effect that sulphur content in diesel should not exceed 0.25 per cent. As a result, the increased interest outflow to the extent of Rs 11 crore and depreciation provision has reduced the profit levels.

The brighter side is the 50 per cent reduction of crude inventory turnover to eight days, resulting in better management of working capital. With the crude prices softening now, coupled with the reduction in operational costs by three per cent and the removal of APM, MRL's bottomline is expected to fatten up this year.

"We have repaid high cost borrowings amounting to Rs 225 crore and the current year interest outgo will be lower," Rammohan says.

MRL's production highlights for 1999-2000 include:  7.01 million ton per annum (mtpa) crude throughput, clocking a capacity utilisation of over 100 per cent . All-time high production (248.1 thousand metric tonnes) of lube oil base stock . All-time high production of aviation turbine fuel (318.8 thousand metric tonnes) . Linear Alkyl Benzene (LAB) feedstock production of 63.2 thousand metric tonnes. Commenced supply of extra low sulphur high speed diesel

MRL has chalked out an ambitious investment plan for around Rs 3,200 crore. The new plans include expansion of its refining capacities at Manali, near Chennai and Cauvery Basin Refinery (CBR); construction of a jetty at CBR; building a 500 MW power station near Chennai; and investment in the Chennai-Trichy-Madurai pipeline project promoted by Petronet CTM Ltd (see MRL's ambitious plans).

The company also plans to put its money in building a 12 million ton per annum (mtpa) refinery, partnering with Indian Oil Corporation (IOC) at Nagapattinam, at an outlay of Rs 10,000 crore. "The detailed feasibility report has been prepared and is under our consideration," says Rammohan. The initial plan was to build a nine-mtpa refinery; later, the capacity was scaled up to 12 mtpa.

A pure refinery company with seven mtpa of crude refining capacity -- Manali (6.5 mtpa) and CBR (0.5 mtpa) -- MRL has decided to scale up its capacities to 10.5 mtpa. The company also has a lube base oil manufacturing unit (2.7 lakh tpa) and a wax de-oiling unit (30,000 tpa).

The expansion of refinery capacity is in line with the industry trend of having global-sized capacities to enjoy the economies of scale. Further, two private sector projects -- Reliance Petroleum and Essar Oil -- have global-scale plants in Jamnagar, Gujarat.
also see : see MRL's ambitious plans

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MRL's profits down, but expansion plans to stay on course