After 2 false starts, Barmer waits for refinery again
Will it be third time lucky for Barmer? This is the question that is floating around as Prime Minister Narendra Modi on Tuesday kicked off the commencement of work for the ~431-billion petroleum refinery at this city in Rajasthan.
The joint venture between state-run Hindustan Petroleum Corporation (HPCL) and the government of Rajasthan will be the first refinery in the country to completely produce Bharat Stage-VI (Euro-6) compliant fuel when it commences work by 2022. The project is expected to bring in an overall investment of around ~700800 billion in the region. But, this is not the first time the refinery plan is being floated by the government.
In2009, that state-run Oil and Natural Gas Corporation (ONGC) had also proposed to set up a refinery there, but later shelved it, citing viability concerns. On September22, 2013, a few weeks away from the election being notified in the state, then United Progressive Alliance chairperson Sonia Gandhi laid the foundation stone for the refinery by HPCL. With Rajasthan voting to power a Bharatiya Janata Party government followed by the National Democratic Alliance taking charge at the Centre, the refinery needed a fresh look.
“With state elections set to come in a year’s time, I feel this, too, is a political stunt to garner votes. Because being a hinterland refinery, availability of water still remains an issue and there are questions regarding viability too ,” said an industry source.
It was in January 2004 that Bar mer rose to prominence after Cairn Energy struck oil in the Mangala field — the largest onshore oil discovery in India in more than 20 years. ONGC old-timers recall the concept of a refinery close to oilwells was first mooted by their former chairman, Subir Raha. ONGC holds 30 per cent participating interest in the RJ-ON-90/1 block in Barmer, while Cairn India holds the remaining 70 per cent.
“At that time, the production profile of Cairn itself was around six years. Moreover, the state government was not ready to extend any fiscal incentives. The study conducted by SBI Caps also indicated that the return of capital was going to be only slightly above one per cent,” a former ONGC official said.
The current nine-milliontonne (mt) Barmer project is part of a larger refinery expansion plan by HPCL, which includes expanding the Vizag refinery from 8.3 mt to 15 mt and Mumbai from 7.5 mt to 9.5 mt. “For Barmer, the government approval is already in place and a land deal has been signed. Unlike in 2013, now the Rajasthan government is set to save at least ~400 billion from the revised viability gap funding for the Barmer refinery project,” Petroleum Minister Dharmendra Pradhan said last week.
Pradhan claimed the earlier agreement by the Congress government was at a huge loss to Rajasthan. The internal rate of return from the project was around six per cent before with a viability gap funding of ~37 billion per year from the state government for 15 years. Now, the rate of returns for the revised project comes to around 12 per cent with an annual support of ~11 billion by the state. The petroleum ministry also adds this time the availability of water has also been addressed by sourcing it from the Indira Gandhi Canal and that of crude oil imports also being managed through a ~25-billion planned pipeline from the Gujarat coast.