Mittal looking to prune Bathinda stake

There seem to be some more delays in the pipeline for the decade-old Bathinda refinery project of Hindustan Petroleum Corporation (HPCL) in which Mittal Investments recently announced its decision to pick up 49 per cent stake.

Sources said Mittal Investments, owned by steel magnate L N Mittal, was looking for a partner for the 49 per cent stake it bought in the project on February 19 this year.

The Rs 16,700-crore project has had a chequered history with the government clearing the project way back in November 1998. HPCL has held talks with four global oil majors - British Petroleum, Saudi Aramco, ExxonMobil and Total - before it signed a deal with Mittal Investments in February 2007. The refinery was originally scheduled to be commissioned in 2010-end.

HPCL, which needs approval from the Foreign Investment Promotion Board (FIPB) for selling 49 per cent in its refinery to a foreign company, has not yet applied to the board. In state-owned refineries, foreign direct investment up to 26 per cent is allowed through the automatic route.

Senior officials in the industry say that the LN Mittal-controlled company is looking to minimise its exposure to the inland refinery, which would feed the domestic market.

Since the country is self-sufficient in petroleum products, coastal refineries are seen to be less riskier, since they are better placed to tap the export market. "Mittal does not have any experience in refineries. Moreover, with increasing refining capacity in the country, Bathinda, not being an export-oriented refinery, has probably sent Mittal looking for a partner," an industry source said.

It is not yet known whether Mittal is looking for an Indian partner or a foreign one. Bringing in an Indian partner and reducing its stake to below 26 per cent would exempt Mittal from getting clearance from the FIPB.

HPCL officials declined to comment, while a Mittal spokesperson did not respond.

Oil India Ltd (OIL), which was also interested in picking up 26 per cent stake in the refinery, has also pulled out. "We are concentrating on a stake in HPCL's upcoming refinery and petrochemical plant at Vizag," said a top OIL official.

"Given a choice between the refineries at Bathinda and Vizag, we prefer Vizag as it is a coastal refinery and thus have the advantage of exporting products," the OIL official said.

Another issue that appears to be dogging the Bathinda refinery is the constitution of the board of Guru Gobind Singh Refinery Ltd (GGSRL), the special purpose vehicle floated by HPCL to construct and operate the refinery.

The government is planning to advertise for the members on the board of GGSRL.

"Stake holders in GGSRL will be inducted in the board as non-executive members. That is not acceptable to the stakeholders," the industry official said.