Rajasthan to take 26% stake in Barmer refinery: Deora

The Rajasthan government plans to take a 26 per cent stake in a refinery proposed to be set up in the state by Oil and Natural Gas Corp (ONGC), Oil Minister Murli Deora said today.

The Rajasthan government has been pressing for a 9-12 million tonnes per annum refinery at Barmer ever since Cairn India found 6.5 billion barrels of oil reserves in the Thar desert. The Barmer field can add 240,000 barrels per day (12 million tonnes per year) to the country's total oil production once plateau output is achieved.

"ONGC has informed that the government of Rajasthan has indicated to take up 26 per cent equity stake in the proposed refinery," he said in a written reply to a question in the Rajya Sabha here.

The proposal for a wellhead refinery in Rajasthan was originally floated by ONGC, which owns a 30 per cent stake in the Cairn oilfield. However, the state-run oil and gas giant had a change of heart after R S Sharma took over as Chairman and Managing Director of the company in 2006 and has been demanding fiscal concessions from the state government before it embarks on the project.

"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 offtake of products and adequate fiscal incentives from the state government to meet the viability gap," Deora said.

ONGC is in consultations with the government of Rajasthan on the feasibility of setting up a commercially viable refinery at Barmer, he said.

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

The state government is also in consultations with Indian Oil Corp (IOC) and Bharat Petroleum Corp (BPCL) for the sale of petro-products from the refinery, he said.

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 waives central sales tax for 16 years.