No sops likely for Bhatinda refinery

The long-delayed Bhatinda refinery project of Hindustan Petroleum Corporation Limited (HPCL) has received another setback, with the Punjab government dithering over the concessions granted to it.

The Punjab government has said it will stand to lose Rs 15,000 crore in the next 15 years if the refinery is established under the present terms and conditions.

Chief Minister Amarinder Singh said in Patiala recently the state was not in a position to meet the loss in terms of taxes and royalty from the project for 15 years.

"Also, the future of the refinery itself is not certain as HPCL, which is promoting the project, is facing disinvestment. If HPCL is disinvested, who will buy the refinery?" Singh said.

However, the Cabinet Committee on Disinvestment (CCD) has already decided that the project will be implemented by either the new management that takes over HPCL after its strategic sale, or by the government.

The project was cleared by the Cabinet Committee on Economic Affairs (CCEA) in October 2000, when HPCL was authorised to implement the Rs 9,806-crore small refinery project on its own.

The project was earlier cleared by the Cabinet to be implemented as a joint venture with a private Indian or foreign company.

The project had run into rough weather when its first proposed joint venture partner, Saudi Aramco, and then the US-based Exxon pulled out from the project saying that refinery margins would not be profitable.

In view of the low growth in demand for petroleum products in the country and the excess refining capacity, HPCL has also planned to scale down the capacity of the refinery from 9 million tonnes a year to 6 million tonnes a year.

HPCL is of the opinion that there has been considerable capacity addition in the country's refining sector since the Bhatinda refinery was first planned. After Relaince built a refinery, with a capacity of 27 million tonnes a year, at Jamnagar in Gujarat, the entire scenario has changed significantly.

Moreover, with the 9-million-tonne capacity Paradip refinery project of Indian Oil Corporation and the Bina refinery project of Bharat Petroleum Corporation Limited under implementation, the refining sector in the country is getting a bit overcrowded.

The demand-supply position of petroleum products has also undergone considerable change in recent years. Against the projected demand of 155 million tonnes of petroleum products in the terminal year of the Tenth Plan (as per the Ninth Plan report), and 148 million tonnes projected in the Hydrocarbon Vision 2025, the projected demand is only about 124 million tonnes (as per the draft Tenth Plan report) for 2006-07.