The turnkey contractor, sources say, will take offered 10 per cent equity in a warehousing deal after which five per cent will be offloaded to another investor. The whole objective of offering a stake to a contractor will ensure his company's commitment to the project. It will also prevent any possibility of spawning an adversial role between the contractor and owner of the pipeline.

Experts say that the experiment has already been attempted by the Infrastructure Leasing & Financial Services in one of its road projects. Apart from the benefits discussed above, it will also widen PIL's choice on choice of contractor for the pipeline as hordes of big names, both from here andoverseas, are expected to submit bids.

"Finally, this arrangement will work to the best interests of PIL," observers say. At one point, engineering major Larsen & Toubro was keen on a stake in the Vadinar-Kandla pipeline but insisted that it be given the first right of refusal to execute the project. This was unacceptable to the PIL top brass.

The Cochin-Karur pipeline (CKPL), with a capital cost of Rs 535 crore and financed through a 3:1 debt-equity ratio, is planned to be set up by Petronet-CCK.

While State Bank of India and ICICI will contribute Rs 90 crore each to the debt portion, Punjab National Bank, Vijaya Bank and Uco Bank will chip in with Rs 45 crore each. Union Bank's contribution will be Rs 36 crore while State Bank of Patiala and State Bank of Saurashtra will lend Rs 27 crore and Rs 22 crore apiece.

The equity holders in Petronet-CCK, who will fund the balance Rs 135 crore, are PIL and BPCL who will hold 26 per cent each, CRL (23 per cent), State Bank of India, AIG-IL&FS fund and theturnkey lumpsum contractor. The cost estimate of Rs 535 crore has been done based on an equipment list at each terminal, preliminary engineering inputs and in-house cost data adopted.

The CKPL project envisages laying a 308 km long multi-product pipeline from BPCL's existing Irimpanam installation at Kerala to the proposed receiving station at Karur, Tamil Nadu, with intermediate tap off points at Shoranur and Coimbatore.

The project includes pumping and despatch facilities at Irimpanam, product tapping facilities at Shoranur and Coimbatore and a full fledged terminal at Karur with rail/road loading facilities.

Experts say that the pipeline is an absolute must given the tremendous pressure on the rail and road networks. The demand for petroleum products, mainly high speed diesel (HSD), motor spirit (MS) and superior kerosene oil (SKO) in the southern region is currently being met from CRL, Madras Refineries, Mangalore Refinery and Petrochemicals (MRPL) and Hindustan Petroleum Corporation's Vizagfacility.

The production ex-CRL is distributed to the demand centres by rail, road and offshore tankers. The availability of products from CRL indicates that the demand for MS and SKO could be serviced by the refinery while there would be a shortfall in HSD. This deficit is expected to be met from imports at Cochin port.

Karur has been found to be the most suitable location as compared to alternate sites like Coimbatore and Tiruchi, since most of the throughput would move onwards in the direction of Karur. Karur is also well connected by rail/road in different directions. Based on the annual demand projections of different products at each base -- at Shoranur, Coimbatore and Karur -- the design throughput of the pipeline is envisaged at four million tonnes.

At Cochin, a suitable plot has been earmarked in BPCL's Irimpanam installation for locating despatch facilities relevant for pipeline operations such as a pump house, corrosion inhibitor system, metering system and scrapper launchingfacility.

Petronet India was formed with the objective of providing pipeline transportation to all oil companies on a common carrier principle. The company would also develop a pipeline network to ensure steady supply of petroleum products and minimise cost of transportation. This would also help bridge the projected shortfall in inland movement capacities.