The Rs 5,700-crore Essar Group has recommenced the 12 million tonne mega refinery project in Gujarat, stalled since 1999, after tying up with financial institutions as part of its efforts to emerge as the second private corporate after Reliance to become an integrated petroleum company, sources said.

After obtaining all clearances and getting the go-ahead by end of January, Essar director Prashant Ruia chose February 6, the festival day of Basant Panchami, to perform puja on the site to kick off the Rs 8,000-crore project, which had been completed when work was stopped in early 1999.

EOL has already invested Rs 6,300 crore on the project including the terminal which provides natural deep draft suitable for berthing very large crude carrier and is closer to the source of crude supply.

Equipment worth $200 million is ready for shipment and major plant and machinery valued at $430 million are already at the site.

Neither the Group chairman Shashi Ruia nor his son Prashant was available for comments while the corporate's communication department remained tightlipped about the restart.

Sources said that the project would be completed by end of 2004 and was part of the group's overall strategy to emerge as an integrated private sector petroleum player having interests in exploration and production as also marketing, for which it obtained retailing licence from the government last year.

Although Essar had started the project in the early ninetees ahead of Reliance, which has the biggest green-field refinery of 27 million tonnes, it was forced to stop work by February 1999 as it could not tie up external credit due to sanctions imposed by the US subsequent to India's nuclear test (Pokhran-II). Also the cyclone in Gujarat had affected the project.

As part of fund mobilisation for the project, Essar is also believed to have nearly finalised deal for its Rigs division and the proceeds from this would be ploughed into the refinery, sources said.

Essar is building up an infrastructure for a 27 million tonne refinery and an expansion could be considered at later stages after the Group stabilises the refinery, sources associated with the project said.

It was, however, not clear whether there could be some additional cost on account of interest during the period the work on refinery was stopped, but Group officials had been working over-time to ensure that the funds were not a problem and were hopeful of obtaining fresh credit line if needed on the strength of the Group's overall good showing in other businesses like power, shipping and telecom.

Of Rs 8,000 crore, the equity participation is about Rs 2,150 crore and the remaining Rs 5,850 crore is debt, sources said adding that financial institutions had agreed for the credit at nine per cent, the same as being extended to Mangalore Refinery where ONGC has recently acquired control after buying the stake of A V Birla Group.