Non-synchronization of Butene-1 project with PNCP (IOCL). X. Xxxxxx-1 is a critical chemical used in production of HDPE and LLDPE. At the conceptual stage of PNCP, it was envisaged (February 2004) that requirement of butene- 1 would be met from butene-1 plant at Gujarat Refinery. Butene-1 plant at Gujarat Refinery though commissioned in 2001 was not functioning due to not meeting quality specification of butene-1. Subsequently, IOCL provided for impairment of assets (Butene-1 plant) in its accounts for the year 2004-05. No alternate source for butene-1, however, was considered while according investment approval (December 2006) for PNCP. IOCL continued its efforts to resolve the issue of butene-1 plant at Gujarat till January 2006. Since then plant was kept idle and finally written off in December 2009. Since Butene-1 was not available, PNCP had no option but to import it for production of HDPE and LLDPE. To avoid expenditure on import and storage facility, Board of Directors (BoD) accorded (22 December 2010) ‘in-principle’ approval for installation of Ethylene Dimerisation Unit for production of 20 KTA Butene-1 at Panipat at an estimated cost of ` 134 crore. Final investment approval was accorded (February 2012) at an estimated cost of ` 190 crore after a delay of 13 months from the date of ‘in-principle’ approval. The plant was subsequently commissioned on 19 May 2014 at a total cost of ` 172.38 crore. Audit observed that: • Butene-1 plant at Gujarat used feed from Gujarat Refinery. As per the quality requirement of feed for production of butene-1, the feedstock should have 'nil' level of sulphur (impurities). The feed received from Gujarat Refinery, however, was having sulphur content of 20 ppm1 as the crude mix processed in Gujarat Refinery contains around 25 per cent to 30 per cent weight of imported high sulphur crude. Butene-1 plant remained inoperative since inception as there was no scope of getting the desired quality of crude for processing at Gujarat Refinery. This fact was known to the Management at the time of taking a decision for investment approval for PNCP in 2006. Still the Company considered sourcing of butene-1 from Gujarat Refinery for meeting the requirement of butene-1 in the proposed PNCP. • To minimise the cost of import, in-principle approval (December 2010) for in- house production of Butene-1 at Panipat was taken after a lapse of one year from write off of Butene-1 plant at Gujarat. Subsequently, there was a further delay of 13 months in the pre-implementation and planning stage and a...
