While PIL officials were unavailable for comment on the issue, industry sources said that the turnkey contractor will be offered ten per cent equity in a warehousing deal after which five per cent could be offloaded toanother investor. At present, however, only 15 per cent of the balance equity component needs to be sewn up which is expected to be taken up by banks and financial institutions. Experts say that the experiment of offering a stake to a contractor has already been attempted by the Infrastructure Leasing & Financial Services in one of its road projects.

"Finally, this arrangement will work to PIL's advantage even for future projects as it will attract the most competitive bids," they added.It may be recalled that at one point, L&T was keen on a stake in the Rs 400 crore 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 bass.

The Cochin-Karur pipeline (CKPL), to be 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 CKPL project envisages laying a 308 kilometre long multi-product pipeline from BPCL's existing Irimpanam installation in 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 Vizag facility. The production ex-CRL isdistributed 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. The deficit is expected to be met from imports at Cochin port.

INSIGHT:

Move to ensure commitment
Dodsal has become the first turnkey contractor to participate in the equity of a Petronet promoted pipeline. The purpose of giving an equity stake to Dodsal was to ensure its commitment to the project. Though all professionally managed companies are committed to any big projects, specially government ones which are recurring, equity participation could have been replaced by a penalty clause on delays or on quality of work. A plausible reason for an equity participation is that this will ensure implementation of the project at minimum cost as turnkey contractors are known to increase the cost on one pretext or the other.

-- Shishir Asthana