The cost of ONGC?s Rs 12,440 crore Dahej Petrochemical project may go up by over 27% or Rs 3,400 crore with fluctations in foreign exchange adversely impacting the prices of the major components of the project.

Company officials told FE that their project appraisal committee has taken stock of the rise in the prices of the major components of the project and the board will soon take a decision on the cost structure.

ONGC, which floated a special purpose vehicle, ONGC Petro-additions Ltd (OPaL) to implement the Dahej petro chemicals project with a 1.1 million tonne per annum dual- feed cracker has a 26% stake with management control in the project valued at Rs 970.32 crore.

The officials said that the board had approved the Rs 12,440 crore project in February this year but it has been calculated that the cost will go up to Rs 15,870 crore because of foreign exchange fluctuation thus adversely impacting the prices, at which the work for major components of the project was awarded.?

?This cost increase will be despite reduction in the front-end value of the engineering consultancy contract awarded to Foster Wheeler Energy Ltd of the UK,? said an official connected with the project. The consultancy contract was awarded to the UK firm at a cost of $1.57 billion but due to the weakening of the Euro the contract is worth $1.36 billion at the current foreign exchange valuation, officials added.

Sources close to the development said that there has been a sharp increase in the value of the L-1 bid for the project?s key components, known as dual feed crackers and this has offset the reduction in the value of engineering consultancy contract.

In fact, the contract value of the dual feed cracker has gone up to Rs 6,832 crore from a level of something above Rs 5,500 crore and this has been on account of the depreciation of the rupee against the dollar.

The same officials also said since the overall project expenditure will go up the additional cost will be funded through additional debt as well as some rejig on the equity front too. The project currently has a debt equity ration of 2.33:1.

GAIL chairman UD Choubey earlier said that GAIL was eager to pick up 19% equity share in the petrochemical project at Dahej special economic zone in Gujarat, although ONGC was offering it only 9%.