Bhatinda refinery promoters seek more sops

The Punjab cabinet will take a decision on the demand for more concessions from the promoters of the 12-million tonne Bhatinda refinery.

The refinery, 40 km from Bhatinda, is being set up by HMEL, a joint venture between government-owned Hindustan Petroleum Corporation and Mittal Energy Ltd.

It is likely to cost Rs 19,000 crore. According to officials of the joint venture, the project is ahead of schedule and likely to be completed in early 2011. Around Rs 5,400 crore have already been spent on it.

In the original proposal, the refinery was to get an interest-free loan of Rs 250 crore a year for five years after commissioning of the project.

 

The promoters are now pitching for an interest-free loan of Rs 400 crore a year and for 15 years. At a discount rate of 10 per cent, the net present value of this concession will be Rs 1,400 crore.

Based on a debt-equity ratio of 3:1, usual for projects of this nature, this means the concessions add up to around 30 per cent of the promoters’ equity.

Punjab Chief Secretary S C Aggarwal confirmed the development and said the proposed incentive would be put to the state cabinet. It is not clear if the state government is in a position to extend the additional support.

The project got approval in 1998 and got relaxations like a 50 per cent concession in stamp duty on the purchase of land, and post-production incentives like a partial electricity duty exemption for five years. It is being set up over 1,990 acres.