Rajasthan agrees to take 26% stake in Barmer refinery: Prasada

The Rajasthan government has agreed to take 26 per cent stake in a refinery proposed to be set up in the state by Oil and Natural Gas Corporation, Minister of State for Petroleum and Natural Gas Jitin Prasada said today.

The Rajasthan government has been pressing for a 9-12 million tons refinery at Barmer after Cairn India found 6.5 billion barrels of reserves that can produce 175,000 barrels per day (8.75 million tons a year) of oil at plateau.

State-owned ONGC, which owns 30 per cent stake in the Cairn's oilfields, had originally proposed the project but had a change of heart after R S Sharma took over the company in 2006 and has since then been demanding fiscal concessions from the state government.

"ONGC is in consultation with the Government of Rajasthan on the feasibility of setting up a commercially viable refinery at Barmer," Prasada said in a written reply to a question in the Rajya Sabha.

He said the state government "has indicated to take up 26 per cent stake in the proposed refinery", a condition an expert group headed by former Oil Secretary S C Tripathi had laid for making the project viable.

The state government is also in consultation with Indian Oil Corporation and Bharat Petroleum Corporation for possible marketing tie-up for sale of products produced at the refinery, he said.

"However, ONGC has informed that a decision on setting up of the refinery would be based on a detailed feasibility study and financial appraisal, bankable marketing agreement for off-take of products and adequate fiscal incentives from state government to meet the viability gap," Prasada added.

ONGC is not keen on the project unless the state government defers local sales tax or extends an interest-free loan of Rs 1,300 crore per year for 16 years, gives free land and water, exempts crude oil from entry tax/cess/octroi and central sales tax is waived for 16 years.