Rajasthan News

UPA plans Rs 37,230 crore refinery at Barmer ahead of polls

by RajasthanDirect
Jul 24, 2013

The UPA government plans to give poll-bound Rajasthan a Rs 37,230 crore refinery at Barmer, and has prepared a note for the Cabinet to give the state its biggest-ever project. The Congress-ruled state has already offered the proposed refinery a financial package of Rs 56,000 crore spread over 15 years to make the proposed project in the desert financially viable.

The Cabinet is expected to approve the project before UPA chairperson Sonia Gandhi and Congress vice-president Rahul Gandhi visit the state to address election rallies in September, government and industry officials said. Assembly polls in the state are scheduled before the end of this year. State-run Hindustan Petroleum Corporation (HPCL), which is the promoter of the 9 million tonne per annum capacity refinery, requires Cabinet approval to implement the project.

The Rajasthan government has been pursuing the central government to have a refinery in the state after Cairn India discovered the country’s biggest on-land oilfield. It intensified its efforts since 2009 when the first oil was produced from the Barmer block.

“Rajasthan is India’s biggest crude oil producing state. It deserves a refinery and the Central government has assured its support. The state government is also committed to giving land and huge financial concessions to make this project viable,” Rajasthan chief minister Ashok Gehlot told ET.

“I have requested the prime minister to help in setting up a refinery in the state. Rajasthan is the only state which has oilfield but not oil-refinery,” he said. The refinery project will be the second biggest project in Rajasthan after the Indira Gandhi canal and its implementation could help Congress regain power, a Congress party leader said. Rajasthan government plans to take up to 26% equity stake in HPCL-promoted refinery project, a state government official said. HPCL is also scouting for a strategic partner. “Talks are on with some national and international oil companies. But, HPCL will hold 51% in the project,” a company official said.

According to the draft Cabinet note the greenfield refinery is financially viable after the state government’s aids including 3,736 crore per year interest-free loan to meet capital expenditure. “With all these concessions and after the processing of 50:50 Rajasthan crude and Arab mix, HPCL has projected a GRM (gross refinery margin) of $15 per barrel, which makes the project incredibly attractive,” a person with direct knowledge of the matter said.

In the last quarter, Reliance Industries reported a GRM of $8.4 per barrel from its giant Jamnagar plant, which often has the highest refining margin in the Asia-Pacific region as it can process the cheapest, low-grade crude oil. The state is offering a total financial incentive package 56,040 crore in 15 years, which is apart from free land, water and basic infrastructure, a state government official said.

But, depreciation of the rupee is one of the major concerns because 15% of the total project cost comprises imported items. Besides, availability of water in the desert area is another challenge, said central government officials examining the project economics.

src: http://economictimes.indiatimes.com/news/news-by-industry/energy/oil-gas/upa-plans-refinery-at-barmer-in-rajasthan-ahead-of-polls/articleshow/21286954.cms

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