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FinMin touts brownfield push for infra at AIIB, oil min goes for greenfield

Roping in Oil Ministry of Adnoc for contentious Ratnagiri refinery project is at variance with FinMin's announcement of $200 mn investment in NIIF fund

Subhomoy Bhattacharjee 

Petroleum Minister Dharmendra Pradhan
Petroleum Minister Dharmendra Pradhan

On Monday morning, India brought in (Adnoc) as the second foreign investor, after Saudi Aramco, to invest in the proposed (RRPCL) project. The estimated cost of the greenfield project is Rs three trillion.

It is ambitious. It demonstrates the interest among large oil companies in the downstream segment of India’s oil sector. It also goes against the recent changes in policy proposed by India’s to instead attract foreign and domestic money in brownfield projects. Those changes are what the is telling the world about at the third annual board meeting of Asian Infrastructure Investment Bank, in Mumbai on the same Monday morning.

In Budget 2018-19, finance minister had made clear the change in the policy of the government. “The Government and market regulators have taken necessary measures for development of monetising vehicles like (InvIT) and (ReITs) in India. The Government would initiate monetising select assets using InvITs from next year.” In consonance with this shift, the ministry of road transport and highways has profitably bid out nine completed roads for maintenance contracts garnering Rs 96.8 billion against an expected realisation of Rs 62.6 billion. The next sets of such projects are on the way, say road ministry officials.

But clearly Jaitley’s cabinet colleague Dharmendra Pradhan, minister for petroleum and natural gas feels there is still scope for furrowing the old route. On the same days when Pradhan is offering a contentious greenfield project to investors, the in Mumbai has announced that AIIB will invest $200 million in one of the funds of India’s It is one of the three funds has floated to buy into infrastructure projects made ready for operations, by the central and state governments—brownfield projects. As NIIF’s CEO, said at one of the sessions, post construction assets give better return to the investors and the Fund is meant to galvanise such investments.

In other words, the Central Government, wiser after the poor quality of project management in many of the public -private partnership projects in the last decade, has decided it will first construct those and then bid them out. At a stroke it eliminates the risk of project delays as private builders invoke various excuses to justify those; it eliminates the risk of having to renegotiate the projects, a recurrent irritant for India’s infrastructure stories and keeps the bank balance sheets safe from having to finance delayed and bloated projects.

Around Ratnagiri, a fierce agitation against the land acquisition for the refinery has shaped up. There will now be a global audience to tune in to the problems, once foreign investors like and Saudi Aramco come in, what ever their merit. And whatever will be the outcome, the agitations and their fall out are certain to delay the project. Even without the foreign investors, these delays were possible but by restricting the risk to the government, the reputation and therefore additional financial risk of those cascading on to other projects would have been minimised.

There are already precedents for the petroleum ministry to walk the brownfield route. Earlier this year, Pradhan’s ministry got an offer from to buy a 24 per cent stake in Bina refinery, a 50:50 joint venture between state run BPCL and Oman Oil company. The expected premium will be useful for a cash-strapped government.

There is an even better option. The government, in last fiscal, went in for a financially debilitating merger between and that is now mired in issues to raise Rs 340 billion to meet its fiscal gap. It is a far better option to monetise (MRPL) than take on its book the risk of a global joint venture like At current market cap, is worth Rs 154.05 billion and obviously there will be fat premium on it, when sold as foreign investors are demonstrating. It will be in line with the recommendations of the committee report “on revisiting and revitalising the PPP model of infrastructure” that was commissioned by this government. Kelkar had noted that risk allocation could be optimally distributed “across all stakeholders by ensuring that it is allocated to the entity that is best suited to manage the risk”. Kelkar, incidentally, was petroleum secretary in New Delhi for quite some years before moving to the finance ministry.

As the minister presides over the signing ceremony for the MoU with the counterpart, Sheikh Abdullah bin Zayed bin Sultan Al Nahyan, the minister for foreign Affairs & international cooperation, he might carefully ponder these options.

First Published: Mon, June 25 2018. 16:37 IST