ONGC to set up refinery in Rajasthan
Oil and Natural Gas Corp (ONGC) may set up a 4.5-6 million-tonne refinery in Rajasthan if the state government agrees to pick up 26 per cent stake in the Rs 9,230-crore project and a host of fiscal incentives.
A committee headed by former petroleum secretary S C Tripathi, which was asked by the Rajasthan government to go into the possibility of setting up a refinery at Barmer, following Cairn India’s oil discoveries, has suggested the setting up of a 4.5-6 million tonnes refinery that may be raised to 9-12 million tonnes in the future.
The project would not be viable in a country that already has surplus refining capacity without fiscal incentives, the expert group said in its report submitted this month.
Rajasthan government has been pressing for a refinery at Barmer after Cairn found 6.5 billion barrels of reserves that can produce up to 240,000 barrels per day (12 million tonnes a year) of oil at plateau.
ONGC is, however, not keen on the project unless the state government defers local sales tax or extends an interest-free loan of Rs 1,300 crore per year for 16 years, gives free land and water, exempts crude oil from entry tax/cess/octori and central sales tax is waived for 16 years.
SBI Caps, which also went into the viability of the project, also suggested an interest free loan of Rs 1,200 crore per year for 16 years to ONGC, the committee said.
Besides fiscal incentives, the project cannot be viable without a “bankable and legally enforceable” tie-up with retailing firms for sale of fuel produced at the refinery.
It said the fuel retailers are not willing to off take fuel like diesel produced at the unit unless a five per cent discount in price is given to make up for the loss they would have to incur on diverting products they already sell in the state.
“Government of Rajasthan can also bear the liability of 5 per cent discount on the refinery price to be given to oil marketing company for the purpose of marketing tie-up by giving equal amount of sale tax/VAT relief on year to year basis,” it said. “Alternatively, this discount can be in the form of interest free loan or grant.” The central government should give at least 50 per cent relief in excise duty on the products for at least five years, it said.
