IndianOil to invest in wind and solar power generation

IndianOil to invest Rs. 2, 000 crore in solar, wind power capacity
Mint, New Delhi, 26 March 2010

India's largest oil refiner, the state-owned IndianOil, will invest
around Rs. 2, 000 crore to develop a wind power generation capacity of
200MW and a solar power generation capacity of 50 MW, said a top
company official.

"Renewable will be a major area of focus for us. We are looking at a
10-year horizon," said IndianOil Chairman Mr. B. M. Bansal. "The
reason why we are looking at renewable, petro chemicals or biodiesel
is because we do not know for how long the subsidy issue will take to
be resolved. Renewable is the way forward." Oil-marketing companies
such as IndianOil, Bharat Petroleum Corp. Ltd and Hindustan Petroleum
Corp. Ltd, which operate almost 95% of petrol and diesel retail
outlets across the country, are expected to end the current fiscal
year with losses of around Rs 45,000 crore on account of not being
allowed to charge market prices for fuel. The combined losses are seen
at around Rs 70,000 crore in 2010-11 at current prices. IndianOil
registered a net profit of Rs 2,950 crore on revenue of Rs 2.85
trillion in 2008-09. Between April and December, it had a profit of Rs
4,664 crore on revenue of Rs 70,415 crore.

The company's under recovery for the nine months was Rs 7,936 crore,
after taking into account upstream discount and oil bonds.

"While an investment of Rsl.000 crore will go towards setting up the
wind power capacity, another Rs l.000 crore will be for setting up the
solar power capacity," Mr. Bansal said. India has a power generation
capacity of 157.000MW, of which 15,427MW is generated through
renewable sources. The Jawaharlal Nehru National Solar Mission aims at
achieving 20,000 Mw of grid solar power and 2,000 Mw of off-grid solar
applications.

Setting up wind power generation capacity will also help IndianOil
claim tax breaks for up to 10 years and get depreciation benefits of
up to 80% on investment in the first year of a project's operation,
besides earning carbon credits.

"The fuel subsidy issue has discouraged investment into the sector,
which has a dampening effect on the national oil companies," said Mr.
Gokul Chaudhri, Partner at a consultancy firm - BMR Advisors. "Oil
companies such as IndianOil are recalibrating where they will be
investing and (are) now looking at sectors which are not regulated in
the (same) manner as fuel prices."

IndianOil has been looking at a diversified energy sourcing. The
company plans a partnership with Nuclear Power Corp. of India Ltd
(NPCIL) for atomic energy projects at Kakrapar in Gujarat (1,400 Mw),
Kodaklam in Tamil Nadu (2,000 Mw and Jaitapur in Maharashtra (3,300
Mw).