Mumbai: Hindustan Petroleum, which had last September announced setting up of a refinery at Barmer in Rajasthan, has expressed hope it will be able to go ahead with the Rs 37,230-crore project as scheduled and will be meeting state officials over the next 10 days to iron out key issues.
The government-run refiner is also confident that it will be able to get the environmental clearance and invite EPC (engineering, procurement and construction) bids shortly as the public hearing on the JV project is over.
"We hope to meet the state officials at the earliest and discuss their concerns. We hope to meet them over the next 10 days or so," HPCL Chairperson and Managing Director Nishi Vasudeva told reporters here over the weekend when asked about reservations expressed by the BJP-led state administration headed by Vasundhara Raje who took charge last December.
The 9-million tonne refinery was the pet project of the previous Congress government headed by Ashok Gehlot and its foundation stone was laid by Congress president Sonia Gandhi in September.
Facing elections, Gehlot had agreed to provide an interest-free loan of Rs 3,736 crore annually for 15 years from the date of commissioning of the refinery-cum-petrochem complex at Pachpadra in Barmer, in which Rajasthan government holds 26 percent and HPCL the rest of the equity.
Asked whether HPCL is ready to offer more stake to state from its present 74 percent, Vasudeva did not offer a direct answer, saying, "it is too early to discuss such matters as we have not heard from the government officially and so the status of the project stands as it was signed."
When Raje was in Opposition, she was critical about the manner in which the deal was inked. The BJP leader had also opposed the terms and conditions of the JV, including the high financing cost.
"We have reviewed the project and as per an appraisal report, the project will earn a profit of over Rs 68,000 crore. The former government had committed an interest free loan of Rs 56,000 crore in 15 years, or Rs 3,736 crore annually, but our stake was kept only at 26 percent," Raje said in July without directly seeking a hike in the state equity.
Speaking on the status of the project, HPCL-Rajasthan Refinery Finance Director K V Rao said, "the state has already transferred 4,000 acres needed for the project to us. We are now into the design work and a lot of field surveys are also being conducted at the site."
Asked when he expects to invite the EPC contracts, Rao said as soon as the green nod is received.
The refinery will source crude oil from nearby Cairn's Barmer fields if the explorer manages to ramp up output to 3 lakh barrels per day (bpd) from the current 1.75 lakh bpd. If Cairn fails to meet this, close to 50 percent of the crude would have to be sourced from overseas, mostly Latin America.
The company has already started construction at the site, said B K Namdeo, Director-Refineries, HPCL.
Asked about the reported tie-up with private oil marketers like Reliance and Essar Oil, as they are likely to re-enter the space following the near price parity of diesel, Vasudeva said nothing has been finalised yet.
However, an official, who did not want to be named, said HPCL is keen to share the infrastructure of private players for convenience and to save on capex. He, however, was quick to add that nothing has been finalised and it is only a proposal at the board level.
As of September 1, diesel under-recovery (gap between retail selling price and its imported cost), came down to just 8 paise, thanks to staggered deregulation started in September 2012 and falling crude prices, hovering around USD 102 a barrel now.
There have been unconfirmed reports that HPCL was in tie-up talks with Reliance, which has burned its fingers in oil retailing as diesel prices shot up massively since 2005-06 but the government refused to hike the rates.
Similar was the fate of Essar Oil, which had also set up tens of hundreds of outlets but closed most of them when the retailing business became unviable. Global oil major Shell had also entered the space but met with the same fate.
While Essar Oil has around 1,400 operational outlets now with 300 under development and plans to have 3,000 more over the next three-four years, Shell has just 78 active fuel stations.
With around 28 percent market share, HPCL is the second-largest retailer and a deal with a private player will cement its position further.
This is not for the first time that Reliance is talking to a PSU oil retailer as in 2009 too it had held parleys for a joint venture.
Out of over 2,000 outlets RIL had set up, only 200-215 are operational on Sunday and investments of over Rs 5,000 crore are stuck in the existing infrastructure.
