Cairn to start laying pipeline in Rajasthan

After months of delay, the Rajasthan government has given Cairn India the go ahead for laying a pipeline to transport crude oil from its Mangala fields after the BSE-listed firm agreed to invoice oil sales in the state rather than at the delivery point in Gujarat.

Last year, the Rajasthan government had stopped the notification for acquiring right of user (RoU) for the nearly 600-km pipeline from Barmer to Viramgam in Gujarat as it saw losses in sales tax revenue if the crude oil was transported and sold outside the state.

Cairn agreed to invoice its buyers in the state but will hand over the custody of crude oil to the potential purchaser in Gujarat, a senior official said. "This essentially would mean that Rajasthan will get the sales tax," he added.

Last month, the Rajasthan government issued the RoU notification to allow laying the pipeline, he said.

Cairn had begun laying the pipeline from Gujarat but not in Rajasthan due to the state government's opposition.

With the RoU in place, it will now begin work on the Rajasthan leg tomorrow with a formal stone-cutting function being organised at Barmer, to be attended by Union Petroleum Minister Murli Deora and Rajasthan Chief Minister Ashok Gehlot.

Cairn India will begin crude oil production from its Mangala field in Rajasthan in the July-September quarter of 2009.

Initially, a refinery was proposed at the site of the oilfield but it was found uneconomical without incentives and so the crude oil needed to be sold. However, none was willing to lay an insulated, heated pipeline to transport the waxy crude that turns solid at normal temperature.

So, Cairn proposed to lay the pipeline and recover the cost through selling crude oil.