Numaligarh refinery wants oil ministry subsidy

Vol 18, PW 24 (30 Jul 15) Midstream & Downstream

Young people these days know the easiest way out of financial difficulty is to call the Bank of Mum and Dad and use emotional blackmail.

Bharat Petroleum subsidiary Numaligarh Refinery is using a similar strategy by turning to the oil ministry for help to fund its Rs20,000cr ($3.4bn) expansion, arguing the project is critical for the development of India's neglected northeast. Numaligarh wants to expand its 3m t/y refinery at Golaghat in Assam to 9m t/y.

BPCL directors cleared the project on July 14 after it was approved by the Numaligarh Board on June 22. A formal request by Numaligarh to the oil ministry for a 'capital subsidy' or financial support is expected shortly.

"The expansion is needed both for the good of the country and the development of the northeast," says a Numaligarh source. Another company source says Numaligarh has Rs3700cr ($582m) on its balance sheet which it can leverage to raise Rs12,000cr ($1.9bn) from banks and financial institutions.

This leaves a Rs8000cr ($1.3bn) shortfall which it hopes the ministry will plug. "Yes the ministry has never provided financial support like this before." he says.

"But central and state governments often give tax holidays for large infrastructure projects." He adds the support could come as a government grant or loan. "Once we arrange funding we can focus on EPC tenders," he says.

"By end-August things will be clearer."