The Bina plant is run by Bharat Oman Refineries Ltd or BORL, which is majority owned by BPCL, which holds a 49% stake. Oman Oil Co. SAOC owns a 26% stake in the joint venture; the rest is held by institutions. The refinery, which was to be commissioned in 2009 but was inaugurated in May 2011 by former Prime Minister Manmohan Singh, has been plagued by technical problems. The issues are likely to be resolved by October, said one of the people cited above, asking not to be identified.

“We have a problem with one of the boilers which is not running continuously and this is hindering seamless run of the refinery,” said the person. “Therefore, even if the refinery is ultra-modern and is registering good margins during its running period, on a yearly average the margins can come down.”

The Bina refinery had a gross refining margin of $7.7 per barrel in 2013-14, whenever it was operational at full capacity, according to a study conducted by Petroleum Planning and Analysis Cell, a statistical body under the petroleum ministry.

Once the issues with the refinery are ironed out, BORL will finally break even and turn profitable, said the second person cited above. “This should happen by the end of this calendar year,” the person said, adding that the company could then go ahead with the initial public offer and capacity expansion.

BPCL plans to double the capacity of the refinery from the current 6 million tonnes per annum (mtpa) to 12mtpa.

B.K. Datta, director of refineries at BPCL, said the Bina refinery will turn profitable soon, without specifying. Datta said that the company will decide on the proposed IPO after the refinery turns profitable.

Since cash flows from the refinery are an issue and the company has an investment commitment towards its Kochi refinery, BPCL has decided to go for so-called “creeping expansion” of the Bina refinery, he said.

The proposed IPO has also been delayed for almost five years now.

Currently, a major part of BPCL’s capital expenditure is earmarked for the expansion of its Kochi refinery from 9mtpa to 15mtpa by end 2016. This will involve an investment of approximately Rs15,000 crore and will increase the total capacity of BPCL to 36mtpa from the current 30mtpa.

Datta said the company has a gap of 6-7mtpa in its refining capacity and sales and hence it has to depend on purchases from Reliance and Essar at a higher cost, which erodes profits.

Analysts are not attaching any major value to the Bina refinery but continue to be bullish on BPCL because of the improving regulatory regime in India and the refiner’s exploration and production portfolio in Mozambique. “Even if Bina refinery turns profitable and goes for further expansion, that expansion will also require further gestation period for a breakeven. So, Bina will continue to be a drag on the company. But it is still the best bet among the oil marketing companies due to its efficient domestic operations and its exploration in Mozambique,” said Soumyadeep Raha, an analyst at brokerage Microsec Capital Ltd.