CPCL shifted the ₹45,000 crore Cauvery project to a cracker-based petrochemical complex. IOC holds 75%, CPCL 25%. A 12-month study will decide execution. ₹1,000 crore spent on land.
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Chennai Petroleum Corporation (CPCL) and parent Indian Oil Corporation (IOC) have abandoned the original plan for a conventional refinery-cum-petrochemical project in Nagapattinam. The ₹45,000-crore Cauvery Basin Refinery and Petrochemicals Ltd (CBRL) project is now being restructured as a pure petrochemical complex. Under the revised structure, IOC holds 75% and CPCL holds 25%. That replaces the earlier model where CPCL and IOC each held 25% and outside investors were expected to provide the remaining 50%.
Managing Director H. Shankar told businessline that the rethink followed persistent pressure on the internal rate of return (IRR) from the original configuration. Technical and feasibility studies are under way with Engineers India Ltd (EIL) and the Tamil Nadu government. Preliminary clarity on the revised product mix and investment structure is expected in about a year.
The original CBRL project was designed as a 9-million tonne refinery integrated with a polypropylene unit. That configuration became less attractive as refining margins weakened and global polypropylene capacity expanded. Shankar said the partners “reassessed the investment structure and product mix” after the economics no longer cleared return hurdles.
The revised proposal moves toward cracker-based petrochemical facilities. A cracker breaks down naphtha into ethylene, propylene, and other building blocks for downstream plastics and specialty chemicals. This route offers better margin visibility because domestic petrochemical supply still lags consumption, keeping local prices above global benchmarks. India’s per capita polymer consumption is well below the global average, creating a structural demand tailwind.
The original 25-25-50 split assumed that external investors would fund half the equity. That structure proved unworkable because the project’s IRR could not attract private capital at terms acceptable to the two state-controlled companies. By shifting to a 75-25 split with IOC as the majority sponsor, the project eliminates external funding dependency. IOC absorbs the capital commitment directly, reducing the risk of a funding gap.
Despite the configuration delays, physical groundwork is well advanced. CPCL has invested nearly ₹1,000 crore primarily in land acquisition and related development. Patta transfers are complete, and boundary wall construction is under way.
| Parameter | Original Plan | Revised Plan |
|---|---|---|
| Project type | Refinery-cum-petrochemical | Petrochemical complex (cracker-based) |
| CPCL stake | 25% | 25% |
| IOC stake | 25% | 75% |
| External investors | 50% | 0% |
| Target capacity | 9 million tonnes/year refinery + polypropylene | Not yet finalised |
| Capital cost | ₹45,000 crore | ₹45,000 crore (estimated) |
| Land status | Not yet fully secured | Fully acquired, patta transfers complete |
Securing a contiguous coastal parcel near Nagapattinam is a material advantage. Greenfield petrochemical projects elsewhere in India have stalled because of land acquisition disputes. CPCL and IOC now control the site, removing that execution hurdle. The ₹1,000 crore already spent on land will be relatively unaffected by the configuration change.
CPCL remains a subsidiary of IOC, and its 25% share of the ₹45,000-crore project implies an equity commitment of roughly ₹2,800 crore assuming a 25% debt component (leverage details have not been disclosed). The company’s net debt-to-EBITDA trajectory will bear watching as capital calls begin. CPCL has already absorbed ₹1,000 crore in land costs, which will sit as project development expenditure regardless of the final configuration.
For IOC, taking 75% signals a strategic priority on petrochemical integration, not just retail fuel dominance. IOC’s consolidated capital expenditure guidance will need to absorb this project while maintaining dividend stability. Analysts will monitor the group’s return on capital employed if IOC’s petrochemical capital intensity rises above historical averages.
A cracker complex attracts derivative units: polyethylene, ethylene glycol, linear alkyl benzene, and specialty chemical plants. If the project moves forward, it could lift industrial activity in one of Tamil Nadu’s less industrialised districts. That dynamic may improve the state government’s willingness to provide incentives, from power tariff concessions to GST reimbursement. Shankar noted that the coastal location, road and rail connectivity, and proximity to port infrastructure make Nagapattinam an ideal site.
Shankar said feasibility studies with EIL and the Tamil Nadu government are ongoing. The company expects preliminary clarity on the revised configuration in about a year. That means construction will not start before late 2025 at best. Execution delays remain the primary risk. India’s petrochemical build-out is crowded. Reliance Industries, HPCL-Mittal Energy, and ONGC are all advancing crackers. CPCL and IOC must differentiate on feedstock cost and port access.
For now, CPCL and IOC have turned a stalled refinery into a more viable petrochemical bet. The shift from fuel-heavy to cracker-based production reflects a structural bet on India’s growing polymer demand. The 75-25 stake split removes funding uncertainty but increases IOC’s exposure. Execution, not concept, is the open question. Traders tracking the stock should set alerts for EIL contract wins and Tamil Nadu government policy announcements, as those will be the earliest visible catalysts in what remains a 12-month story. Full stock market analysis is available for subscribers.
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