The new refinery will produce diesel and petrol in compliance with Bharat Stage VI standards. Credit: SatyaPrem from Pixabay.

State-owned Indian Oil Corporation (IOC) has received its board’s approval to build a new refinery in Nagapattinam in the southern state of Tamil Nadu, with an investment of INR293.61bn ($4.01bn).

The new refinery will be established by IOC’s subsidiary Chennai Petroleum Corporation Limited (CPCL).

The proposed plant will have an annual refining capacity of nine million metric tonnes and is aimed at meeting the demand of petroleum products in southern India.

IOC in a stock exchange filing said: “The board has also accorded in-principle approval for the formation of a joint venture between IOC and CPCL with equity holding of 50% (ie 25% each in the joint venture) and balance to be held by financial/strategic/public investors to be identified later, for implementation of the project, subject to the approval of NITI Aayog and other statutory approvals.”

IOC chairman and managing director SM Vaidya was quoted by Business Today as saying that the new refinery is planned to be completed within 48 months from the dates of statutory clearances and investment approval.

The refinery will source 80% of materials and services indigenously. It will be equipped to produce diesel and petrol in compliance with Bharat Stage VI standards, the company said.

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About 6% of the crude processed at the new refinery is planned to go into making petrochemicals, reported The Hindu BusinessLine.

Vaidya was quoted by the news agency as saying at a press conference: “We have kept margins to increase petrochemical production.”

Vaidya indicated that the project would receive funding mainly from debt.

“Our debt-to-equity ratio is quite healthy at 0.6621. We have the appetite for raising debt,” Vaidya noted.

Last year, IOCL was reported by India’s PTI as saying it is investing Rs148bn ($1.02bn) in expanding the capacity of its Barauni refinery in Bihar, a state in India.