Steel czar Lakshmi N Mittal has threatened to stop work on the Rs 18,919-crore oil refinery project at Bathinda in Punjab unless the state government restored the fiscal incentives, which were scrapped a few years ago by the previous Capt Amarinder Singh government.
Mittal is believed to have written to Prime Minister Manmohan Singh seeking his “personal” intervention in the issue that has threatened the viability of the 9-million-tonne refinery project. Sources in the know of the development said earlier this month, Mittal wrote to Prime Minister Manmohan Singh demanding fiscal concessions on a par with the Madhya Pradesh government’s incentives for Bharat Petroleum-promoted Bina refinery project.
After losing a fortune in the global economic meltdown, Mittal had contemplated quitting the project altogether, but had been persuaded to stay on with the promise that the Centre would convince the Punjab government to restore fiscal concession.
Without the fiscal concessions like sales tax waiver on fuel it produces, the landlocked refinery was not viable and Mittal was not willing to put more than the Rs 500 crore he had paid for the equity, sources said. Mittal wrote to the prime minister saying that in the absence of fiscal concessions, he and project partner Hindustan Petroleum would be “reluctantly constrained to stop work,” they added.
The India-born billionaire has already pulled out of HPCL’s proposed $6-billion refinery-cum-petrochemical project proposed at Vizag in Andhra Pradesh.
Sources said the previous Congress government in Punjab, headed by Capt Amarinder Singh, had withdrawn waiver of sales tax on products from the refinery saying the fiscal concession meant the state would have to forgo Rs 600-700 crore in revenues.
The Madhya Pradesh government has given local sales tax concessions of Rs 250 crore per annum along with the waiver of central sales tax for a period of 15 years to the Bina refinery project. The HPCL-Mittal Energy has already provisioned Rs 10,000 crore of spending for the project slated for completion in March 2011.
HPCL and Mittal Energy Investment Pvt Ltd, Singapore, a Lakshmi N Mittal Group Company, hold 49 per cent stake each in HPCL-Mittal Energy Ltd, the firm implementing the Bathinda refinery project. The refinery will produce petroleum products complying Euro-IV emission norms with captive power plant for 165 Mw and crude oil pipeline from Mundra in Gujarat to Bhatinda with Single Point Mooring (SPM) and crude oil terminal at Mundra.
The refinery is the single largest investment at any location in Punjab. It would create a large number of jobs directly and indirectly in the region.
The partners had recently arranged Rs 7,793 crore from a consortium of 26 lenders to fund the debt portion of the project. The project is being financed in a debt-equity ratio of 1:5:1.
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