ONGC not keen on Rajasthan refinery sans incentives

Oil and Natural Gas Corp (ONGC) may be prepared to 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 Rs9,230 crore project, besides extending fiscal incentives.

A committee headed by former oil secretary S C Tripathi, which was asked by the Rajasthan government to go into the possibility of setting up a refinery at the site of a massive oil find by Cairn India, has suggested setting up of a 4.5-6 million tonne refinery that may be raised to 9-12 million tons in future.

According reports, the expert group said in its report submitted this month that the project would not be viable without fiscal incentives in a country that already has surplus refining capacity.

The 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 tons 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 Rs1,300 crore per year for 16 years, gives free land and water, exempts crude oil from entry tax / cess / octroi, 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 Rs1,200 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.