Rajasthan government scouts for consultant for refinery project

The Rajasthan government is scouting for a consultant or consultancy firm familiar with the oil, gas and refining sector to evaluate the terms and conditions for setting up an oil refinery in Barmer district.

According to a senior official in the state's Directorate of Petroleum, the process to vet the bids is underway following an expression of interest (EOI) issued by the government last month.

"A final decision is likely to be taken up on appointment of a consultant soon," he told IANS here Saturday.

The Vasundhara Raje-led government is appointing the consultant as it feels the concessions and sops given by the previous Ashok Gehlot-led state government would severely affect the state's financial health.

The previous government had entered into a Memorandum of Understanding (MoU) with Hindustan Petroleum Corporation Ltd.(HPCL) in March 2013 to establish a nine MMTPA refinery-cum-petrochemical complex in the district at an estimated cost of over Rs. 37,230 crores.

Later, a joint venture (JV) agreement was signed in July 2013 between HPCL and the state government.

The proposed refinery was to be a subsidiary of HPCL with an equity of 74 percent to be held by HPCL and 26 percent to be held by the Rajasthan government. The project cost was proposed to be sourced with a debts/equity ratio of 1.5:1. The total equity component was Rs.14,892 crore and debt was Rs.22,338 crore.

HPCL's equity contribution was put at Rs.11,020 crore at 74 percent equity and the Rajasthan government's equity contribution at Rs.3,872 crore at 26 percent.

The government was considering giving HPCL incentives like an interest free loan for 15 years.

As per the terms and conditions, an annual interest free loan of Rs. 3,736 crore was to be provided to the JV company, formed for establishing the refinery by the state government for 15 years, beginning from the year in which the commercial production commences at the refinery.

The present government felt that in the proposed refinery project the total investment incentive assured by the state government was very high and may adversely impact the state economy. So the government wants the project to be re-evaluated, officials said.

The selected consultant will be expected to make an assessment of the refinery-cum- petrochemical project's financial viability; recommend minimum quantum of support as interest free loan and its period if required to be given by the Rajasthan government to make it financially viable; and suggest an optimum financial model to set up the project.