How to tell Rajasthan you don't want to build a refinery

Vol 10, PW 19 (25 Jan 07) People & Policy

No one is in any doubt that ONGC and Cairn abandoned plans long ago to build a refinery in Rajasthan.

But that can’t be said for state BJP chief minister Vasundhara Raje, who still clings to the hope that Rajasthan will have its own refinery. PETROWATCH learns Raje wrote a stinging letter to oil minister Murli Deora on 15th January protesting loudly against a long list of ONGC pre-conditions that it wants the state government to meet before it considers setting up a refinery in the state.

Angry, Raje accuses ONGC of using these demands, many of which are plainly impractical and others ludicrous, as an elaborate excuse to back track on its commitment. Among the ONGC demands are: ONGC should be exempt from paying local sales tax/VAT equivalent to Rs1300cr ($295m) per annum for 16 years and that this amount should be treated as an interest free unsecured loan ONGC should be allowed to begin interest-free capital repayments of the loan from the 16th year ONGC should benefit from “perpetual exemptionâ€‌ of entry tax and cess (tax) or similar levies on crude oil, chemicals, catalysts, and other raw materials required in refining and processing ONGC should be exempt from sales tax on raw materials/intermediates used to construct the refinery Rajasthan state government should develop raw water and auxiliary facilities for uninterrupted water supply at the refinery site Rajasthan state government should allot land free of cost for refinery construction ONGC should benefit from “perpetual exemptionâ€‌ of electricity duty or tax on the purchase of self-generated electric power Rajasthan state government should strengthen road links, culverts, bridges between the refinery site and the nearest highway Rajasthan state government should help in getting Right of Way permission for crude and product pipelines and laying a railway line to the refinery from the nearest railway station Could it be that ONGC would also like Rajasthan to fund construction of the refinery from its own budget Using measured language to respond to such blatant temerity, Raje writes: “Seeking such huge amount of relief from a state like Rajasthan is tantamount to a disinclination to execute the project.

â€‌ Raje points to the VAT tax postponement demanded by ONGC as the most preposterous: it works out to “a staggeringâ€‌ Rs21,000cr ($4.7bn) - almost double the Rs12,000cr ($2.7bn) cost of the refinery. Raje ends by accusing ONGC of demanding “far in excessâ€‌ of that agreed for refineries by Punjab, Madhya Pradesh and Orissa, none of which have the “advantage of crude production.