Before Prime Minister Narendra Modi travelled to Rajasthan last week, the state government had said he was visiting for the foundation stone-laying ceremony for an oil refinery in Barmer. Former Chief Minister Ashok Gehlot, however, wrote to Modi on January 5, wanting to know how the foundation stone could be laid twice for the same project. The government then said the PM’s visit was for a “public meeting on the occasion of commencement of work” for the refinery. What is this refinery, and the political tug-of-war around it?
Cairn’s Mangala Terminal in Barmer sells its crude to refineries in adjacent Gujarat. A refinery in Barmer itself has been seen as a source of handsome revenues, investments in the form of petrochemicals and ancillary industries, and a vehicle for the region’s development. An estimated 40,000 people are projected to get employment during the peak construction period, and the completed refinery is expected to provide jobs to 1,000 people. It will be the first refinery in India with BS-VI standards, and the first with a petrochemical complex. The state government has described the 4,813-acre, Rs 43,129-crore project as the largest investment in the state, an “anchor” for industry in Western Rajasthan.
Plan and Delay
Modi said former Vice-President Bhairon Singh Shekhawat had been the first to “imagine” the refinery. In 2004, it was proposed by then ONGC chairman Subir Raha and, the following year, ONGC announced that a 7.5 million tonnes per annum (mtpa) capacity project with an investment of Rs 9,000 crore would be set up. However, the then Vasundhara Raje government did not agree to give fiscal incentives such as interest-free loans, and the project remained a non-starter. The foundation stone for the project was finally laid in 2013, the last year of Ashok Gehlot’s government. But Raje returned to power that December, and her government said the refinery, as proposed by the Gehlot government, was unviable.
In April 2017, the government renegotiated terms with Hindustan Petroleum Corporation Limited (HPCL), and agreed to provide viability gap funding (VGF) to the tune of Rs 16,845 crore in the form of interest-free loans of Rs 1,123 crore per annum for 15 years from the date of commissioning, to be refunded from the 16th year onward. Gehlot’s government had agreed to a much higher VGF of Rs 56,040 crore, the government said, and aggressively advertised the Rs 40,000 “savings” it had brought. Hoardings leading to the venue of the PM’s meeting displayed the “savings amount”, and Modi mentioned it while praising Raje as a royal with “a (thrifty) Marwari temperament”.
After the then UPA government approved the project, then Congress president Sonia Gandhi laid the foundation stone on September 22, 2013 at Pachpadra. The Raje government says the ceremony was performed days before the imposition of Model Code of Conduct on September 27, land was allotted to the project without any lease deed having been executed or environment clearance obtained, and no activity on the ground was initiated. The Congress on the other hand, blames the BJP for having delayed the project for long.
Only the construction of the boundary wall has begun so far. Tenders worth Rs 50 crore have been awarded for pre-project activities like route surveys of crude pipeline, product pipeline, water pipelines etc. The government aims to complete the refinery by 2022.
In December 2012, HPCL had told the Petroleum Ministry that the refinery would be unviable unless it was given all of the crude oil — 1.75 lakh barrels per day (bpd) — that Cairn produces from oilfields in the state. Last week, Petroleum Minister Dharmendra Pradhan announced that the Barmer refinery would buy about 50,000 bpd from the Cairn oilfield; however, the refinery’s capacity will be 1,80,000 bpd. It is unclear how the rest will be worked out. Cairn plans to invest Rs 37,000 crore over the next few years to significantly ramp up production at Barmer.
When oil was discovered at Mangala in Barmer in 2004, it was the largest onshore discovery in India in more than two decades. The high hopes of the local people have not quite worked out, however, and experts say wider benefits will be largely dependent on favourable government policy.
Also, while India’s refining capacity has jumped from 62 million metric tonnes per annum (MMTPA) in 1998 to over 215 MMTPA at present, over 82% of the crude is still imported. In the circumstances, the wisdom of investing in another refinery is doubtful, experts say. They also caution the government to be mindful of technological advancements — the government itself has announced plans for a “100 per cent” shift to electric mobility by 2030. The policy focus, these experts say, should be on crude discovery, rather than on refineries.