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Bharat Petroleum Corporation (BPCL), India's second biggest state refiner, plans to spend about Rs 10,000 crore in 2016-17 to expand and upgrade its refining capacity and augment its marketing infrastructure, its finance chief has said.
"We need to invest in infrastructure to meet the growing demand in the market," said P Balasubramanian, director (finance) at BPCL, which has made about Rs 9,500 crore in capital expenditure in the current fiscal year. Indian refiners and fossil fuel retailers have been working on adding new capacity to cater to the rapidly rising fuel demand in the country.
The petroleum product consumption had grown by 10% till January this fiscal year. An expansion underway at Kochi refinery will take about 40% of the BPCL's planned capex for 2016-17. The refinery is adding 6 million tonne per annum (MTPA) to the existing capacity of 9.5 MTPA. BPCL's total capacity is about 27.5 million tonne.
Another Rs 1,000 crore would go towards upgrading other refineries to help them produce higher grade fuels that meet Euro IV and VI emission norms. The government wants all state refiners to make available Euro IV fuels across the country next year and Euro VI by 2020.
About Rs 1,000 crore would be utilised by the company's upstream business managed by Bharat Petroresources that has just bought nearly 10% stake in an east Siberian field owned by Rosneft. The balance funds would be deployed in building a petrochemicals unit, pipelines, marketing terminals and depots, and procuring cooking gas cylinders.
BPCL wouldn't need to raise fresh funds and would rely on internal resources and the previously-tied up borrowings to finance the planned capex, Balasubramanian said. BPCL and other state firms are now facing tough competition from the private sector in the key fuel retailing business and need to invest more to strengthen their position in the market.
"The biggest challenge is to retain and grow the market share with growing competition, and meeting customer expectation in the industry," he said. In a year after the deregulation of diesel sales, Reliance Industries , Essar Oil and Shell have together taken about 4% in petrol and diesel volumes across the country and threaten to gobble more quickly with their price discounts and other promotional efforts.
An ambitious target set by the government to add about 10 crore cooking gas consumers in three years, or about 60% of the current base, means distributors like BPCL will have to invest heavily in setting up import and distribution terminals and bottling plants as well as in purchasing more gas cylinders.
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