The Telegraph
Since 1st March, 1999
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Concern over progress of twin refineries

New Delhi, May 21: The Prime Minister’s Office (PMO) has asked the petroleum ministry to furnish a report on the current status of the Paradip refinery being set up by Indian Oil Corporation (IOC) and the Bhatinda refinery of Hindustan Petroleum Corporation Ltd (HPCL) in Punjab.

Sources say that the PMO has been bombarded by letters from the Orissa and Punjab governments over the fate of these two grassroots projects. A meeting will be held soon with the chief secretaries of these two states to update them on the latest developments connected with the projects.

Since both these refinery projects have been cleared by Prime Minister Atal Bihari Vajpayee himself any doubts on their implementation could prove to be an embarrassment for him.

The Bhatinda refinery has run into uncertainty because of the government’s decision to divest its stake in HPCL. There are serious differences between petroleum minister Ram Naik and disinvestment minister Arun Shourie on whether it should been made mandatory for the new owner to complete the refinery project.

Naik feels that since Vajpayee had laid the foundation stone of the Bhatinda refinery it would involve a loss of face if it is not implemented.

Shourie, however, has now veered round to the view that IOC or ONGC would complete the refinery in case the private company which takes over HPCL is not interested in going ahead with the project. However, the hitch is that IOC is expanding its own refinery at Panipat while ONGC does not have a retail marketing network. Neither of these two companies are, therefore, interested in setting up the refinery. They will, therefore, have to be forced to take up the project.

The Paradip refinery reflects a rosier picture since IOC is committed to implementing the project. The petroleum ministry is holding the Orissa government responsible for delaying the project as it first granted tax concessions to the tune of Rs 4,039 crore for the refinery and then suddenly withdrew them. This had rendered the project economically unviable. It was only after a prolonged delay that the tax concessions were restored.

Indian Oil has decided to go slow on Paradip refinery as the project cost has shot up to Rs 12,400 crore from the initial figure of Rs 8,312 crore and the demand for petroleum products is not growing at the anticipated rate. This has adversely impacted the economics of the project.

Sources said IOC has “committed'' only Rs 1,050 crore in the project now. An expenditure of Rs 558 crore has been incurred on pre-project activities like dredging and reclamation of the 3,347 acres acquired for the refinery on the eastern coast.

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